Investor Presentation August 2010

Disclaimer
No representation or warranty, express or implied is made as to, and no reliance should be placed on the
fairness, accuracy, completeness or correctness of such information or opinions contained herein. The
information contained in this presentation is only current as of its date. Certain statements made in this
presentation may not be based on historical information or facts and may be forward looking statements,
including those relating to the banks general business plans and strategy, its future financial condition and
growth prospects and future developments in the industry and regulatory environment. Actual results may
differ materially from these forward-looking statements due to a number of factors, including future changes
or developments in the banks business, its competitive environment and political, economic, legal and social
conditions in India. This communication is for general information purpose only, without regard to specific
objectives, financial situations and needs of any particular person. This presentation does not constitute an
offer or invitation to purchase or subscribe for any shares in the bank and neither any part of it shall form the
basis of or be relied upon in connection with any contract or commitment whatsoever. The bank may alter,
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manner.

Table of contents
1.

City Union Bank Overview & Growth Story

4-11

2.

Ownership Pattern

12-14

3.

Management

15-18

4.

Financial Performance

19-32

5.

Strategy

36-37

6.

Recognitions

38-40

1. City Union Bank Overview & Growth Story

Showcasing steady performance on an ongoing basis

ong and consistent track record of profitability Profit and dividend payout in all 100 + years of operation
Steady growth Business growing at a CAGR of 27% and Net Profit at a CAGR of 30% in last five years
RoA and RoE at 1.5% and 20.5% respectively, which is considered healthy in the banking space

t Corporate Practices; All Independent & Professional directors; Continuity in Management only 6 CEOs so

pid progress on the technology front with 100% business under CBS and State of the Art Technology platfo

gnificant improvement in asset quality over the years. Net NPA 0.58% and Provision Coverage Ratio > 70
Well capitalized; CAR Basel II 13.46% as on March 31, 2010
Future plans for expansion of branch network to 500 Branches in next 3 years
Rated as No.1 by Chartered Financial Analyst Magazine

CUB is well positioned to capitalize on the huge growth opportunities in the banking sector

Key milestones

2003
Obtained licenses to act as
a agent for procuring life
insurance & general
insurance business

1998

2009

Initial Public Offering (IPO);

Listing Banks shares on
the BSE, NSE & MSE

Rights issue for equity

shares @ 1 : 4 to
reward the existing
shareholders

1965

2007

Amalgamation of The City

Forward Bank Limited and
The Union Bank Limited
with our Bank

Preferential allotment for equity

shares strengthening banks
capital adequacy ratio

1904

2002
Entered into agreement with TCS
for core banking solution Quartz

Incorporation of the Bank

1957
Take over of Common
Wealth Bank Limited

1945
Scheduled bank since
22.03.1945

Strong presence in the South

A network of 222 branches of which 193 branches are located in South India and 139 in Tamil Nadu alone

State wise branches

No of
Branches

Statewise %
of Branches

% of our
Business

139

63

73

Andhra Pradesh

29

13

Karnataka

15

Maharashtra

12

Kerala

10

Gujarat

Others

11

222

100

100

State
Tamil Nadu

Total

Branch Expansion

We have received License from Reserve Bank of India to open 62 more branches in various states
within a Year. Out of which 40 branches are in Tier I and Tier II centres and 22 More
branches planned to open under Tier III to VI centres.

State wise Branch Expansion planned

State
Tamil Nadu

Tier I & II
centres

Tier III to VI
centres

20

22

Andhra Pradesh

Karnataka

Maharashtra

Chattishgarh

New Delhi

Orissa

Punjab

Uttar Pradesh

Total

40

22

Providing a wide array of services

(1/2)

Services & facilities Domestic banking

Implementation of core banking at all the branches enabling customers to operate their accounts from any
of the branches
168 own inter connected ATMs nationwide as on August 15, 2010; Access to ATMs through Cashtree, NFS,
VISA tie-ups
VISA debit card access worldwide
RTGS and NEFT available at all branches
Internet and mobile banking facility
SMS alert facility
Utility bill payments Telephone, electricity, credit card payments etc
E-Tax payment facility
E- payment of college term fees, mess fee & examination fees for university students
Demat services in tie-up with NSDL

Providing a wide array of services

(2/2)

Services & facilities - International banking

Forex services to the importers & exporters
Trade credit facility to importers
Handling overseas direct investments and foreign direct investments
International banking operations / cross border banking through correspondent banking relationships with
HSBC Bank, Wachovia Bank, Standard Chartered Bank, Commerce Bank & others
Forex dealing services through forward contracts, etc.
Tie up with Doha Bank for arrangement of money transfer
Drawing arrangement from Singapore with Bank of India
Money 2 India Service Tie up with ICICI Bank for fund transfer
Arrangement with UAE Exchange and Majan exchange for money transfer

10

Offering the best of both worlds and more

Old private sector banks

New private sector banks

Flexibility to enter adjacent markets and

Perception of Poor asset quality

High proportion of retail deposits low

businesses
Diversified product portfolio

CASA

High operating expenses

Relative size of asset base

High % of fee income

High cost of funds

Strong growth

Operating efficiencies

Asset quality

Large branch network

High ROA

Strong customer base

Technology savvy

Focused approach towards SMEs

Plans to open branches in Tier II and Tier III cities
Experienced management team

11

2. Ownership Pattern

12

A well diversified investor base

Ownership profile as on 30th June 2010

Major shareholders as on 30th June 2010

Shareholders
L & T Capital Holdings

4.79

LIC of India

4.68

Nederlandse Financierings

4.68

Ares Investments

3.90

Integrated Enterprises (I) Ltd.

3.90

Argonaut Ventures

3.66

Acacia Partners Lp.

3.04

Alpha Systems Pvt Ltd

2.59

GMO Emerging Illiquid Fund

1.75

Karur Vysya Bank

1.51

Well diversified ownership

Long term investors adding credibility and support to management
Cash management services offered to LIC to improve CASA and customer base
Bank Assurance partner to LIC and ranked No.1 in South India consecutively for three years

13

% holding

Rights Issue FY 2009-10

During the year 2009-10, we have issued 80 mn equity shares with a face value of Re.1/- each (Rights
Equity shares) for cash at a price of Rs.6/- including a premium of Rs.5/- aggregating to Rs.48 crores
to the existing equity shareholders of our Bank on rights basis in the ratio of 1 Rights Equity share
for every 4 Equity shares held.
The total proceeds through rights issue was around Rs.480 mn.

Capital increases from Rs.320 mn to Rs.400 mn.

14

3. Management

15

Transparent Corporate Governance practices

All directors are Independent and Professional directors

Various sub-committees of Board have been formed to oversee the operations of the Bank

Code of conduct for directors and senior management has been put in place

Disclosure norms are strictly adhered to

16

A well experienced and strong Board

(1/2)

We have eminent personalities on our Board;

1 Former Chairman of a PSU Bank
3 Chartered Accountants
2 Agriculturists
1 Industrialist
1 Advocate
1 Chief Comm. Of Income Tax (Retd.)
1 Retd. High Court Judge
1 Banking professional

Profile of Board of Directors

Name

Profile

Mr. P.Vaidyanathan,
Chairman

He is a graduate in Commerce, a Fellow Member of the Institute of Chartered Accountants of India,

Associate Member of the Institute of Cost & Works Accountants of India and Associate Member of
the Institute of Company Secretaries of India. He has more than 35 years of experience in financial
services industry

Mr. S.
He holds a Master degree in Mathematics, CAIIB and PGDFM and has 38 years of experience in the
Balasubramanian, MD banking industry. He had joined City Union Bank in 1971 as a probationary officer and has since then
& CEO
been associated with the Bank in various capacities. In 2005 he was appointed as the Chairman &
CEO of our Bank and thereafter, in 2009 the Reserve Bank of India has accorded approval for his
appointment as the Managing Director and CEO of our Bank with effect from January 31, 2009
Mr. V.Jayaraman,
Director

A Post Graduate in Statistics and an agriculturist he has been on the board since 2002. He joined the
Indian Revenue Service in July 1963 and held various posts in the Income Tax Department. He was
on deputation to the Ministry of Home Affairs, New Delhi. He was the Chairman of Banking Service
Recruitment Board, Southern Region as well as an Insurance Ombudsman, Southern Region

Mr. K.S. Raman,

Director

He is a post graduate in Statistics. He is an agriculturist and has been on the board during 1984 to
1992 and 1994 to 2002 and presently from 2004 onwards. He has worked with Statistics
Department, Annamalai University, Automobile Products of India Limited and in Larsen & Toubro Ltd

17

A well experienced and strong Board

(2/2)

Profile of Board of Directors

Name

Profile

Mr. S. Bernard,
Director

He is a graduate in Commerce and a Fellow Member of the Institute of Chartered Accountants of

India. He is a practicing Chartered Accountant of 31 years standing with expertise in the field of
Accountancy and Taxation

Mr. N Kantha Kumar,

Director

He is a graduate in Commerce and Law. He has been in the Banking Industry for around 38 years.
He has held key positions such as Executive Director in Canara Bank and Chairman & Managing
Director in Syndicate Bank

Mr. N.Sankaran,
Director

He is a Bachelor of Engineering (Civil) and is a Member of Institute of Engineers, India and has
been on the board since 2008. He is a retired General Manager from M/s. Voltas International,
Chennai

Mr. M Naganathan,
Director

He is a graduate in Commerce and a Fellow Member of Institute of Chartered Accountants of

India. He has been on the board since 2008 and is a senior partner in M/s. Price Patt & Co.,
Chartered Accountants, Chennai.

Mr. R.G.
Chandramogan,
Director

He is the Chairman & Managing Director of Hatsun Agro Product Limited. He has been in the dairy
processing and Ice cream business for around 30 years. He visits the Indian Institute of
Management, Ahmedabad as a guest faculty.

Mr. T.K. Ramkumar,

Director

He is a graduate in Commerce and an advocate. He is a partner in M/s. Ram & Rajan &
Associates, and possesses knowledge and experience in banking law, company law, intellectual
property rights, civil laws etc

Justice (Retd.)
S.R. Singaravelu,
Director

He is a former Judge of High Court of Madras and High Court of Orissa. He has vast experience of
36 years in the Judiciary. He was in Judiciary Department and held various position.

Mr. C.R. Muralidharan, He retired as a whole time member of the Insurance Regulatory and Development Authority
Director
(IRDA) in November 2009. Prior to this appointment he was a Chief General Manager in Reserve
Bank of India. He has extensive experience in regulation of Banks in Reserve Bank of India and
Insurance Companies in IRDA.

18

4. Financial Performance

19

FY10 performance A snapshot

FY 10 performance
Particulars
Deposits

FY 2009-10
(in INR mn)

FY 2008-09
( in INR mn)

Absolute
Growth

% Growth

102,845.9

82,066.2

20,779.7

25.3%

68,967.1

56,862.2

12,104.9

21.3%

171,812.9

138,928.4

32,884.5

23.6%

Gross NPA Qtm

935.0

1020.8

-85.8

Net NPA Qtm

396.7

611.1

-214.4

Gross NPA

1.36%

1.80%

Net NPA

0.58%

1.08%

Advances
Total Business

Key highlights
Total Business of the Bank increased by 24% during the FY 2009-10.
Deposits increased by 25% over previous year and Advances increased by 21%.
Gross NPA brought down to 1.36%
Net NPA reduced to 0.58%

20

Direction

FY10 performance A snapshot

FY 10 performance
Particulars
Total Business

FY 2009-10
( in INR mn)

FY 2008-09
( in INR mn)

Absolute
Growth

% Growth

171,812.9

138,928.4

32,884.5

23.7%

Net Interest Income

2,781.4

2,425.7

355.7

14.7%

Other Income

1,435.0

1,236.8

198.2

16.0%

Operating Exp

1,658.5

1,395.3

263.2

18.9%

Operating Profit

2,557.9

2,267.2

290.7

12.8%

Net Profit

1,527.6

1,221.3

306.3

25.1%

CRAR Basel II

13.46%

12.69%

Core CRAR Tier I

12.41%

11.48%

Provision Coverage
Ratio

70.27%

53.23%

Key highlights
Total business of the Bank grew by ~24% in FY10
Net interest income increased by 15% and PAT increased by 25%
Net Profit increased by 25% from Rs.1221.3 Mn to Rs.1527.6 Mn
Provision Coverage Ratio achieved well in advance.
High CRAR offers scope for more leverage
High Tier I Capital offers huge scope for increasing Tier II Bonds

21

Direction

Key business indicators

Key indicators
Particulars

FY 2009-10

Cost of Deposits

FY 2008-09

7.73%

7.98%

13.04%

13.46%

Return on Investments

7.84%

8.58%

Net Interest Margin

3.15%

3.49%

Cost to Income

39.33%

38.10%

Operating Exp - as a % of NII

59.63%

57.52%

1.52%

1.50%

20.55%

18.48%

Per Employee Business ( in INR

mn)

65.10

56.51

Per Employee Profit (in INR mn)

0.58

0.50

EPS (in INR.) FV INR1/- Share

4.03

3.23

Yield on Advances

Return on Assets (ROA)

Return on Net worth (RONW)

Key highlights
Healthy RONW at 20.5% in FY10 up from 18.5% in FY09
Cost of Deposits decreased from 7.98% in FY09 to 7.73% in FY10
ROA increased marginally from 1.50% in FY09 to 1.52% in FY10

22

Direction

Q1 FY11 performance A snapshot

Financial Performance Q1 FY 11 Vs Q1 FY 10
Particulars
Deposits

Q1 FY 11
( in INR mn)

Q1 FY 10
( in INR mn)

Absolute
Growth

% Growth

106,096.5

83,767.2

22,329.3

26.6%

72,096.6

55,366.5

16,730.1

30.2%

178,193.1

139,133.7

39,059.4

28.1%

21,672.4

15,234.0

6,438.4

42.3%

Gross NPA

934.4

1087.2

-152.8

Net NPA

389.2

798.5

-409.3

Gross NPA (%)

1.30%

1.96%

Net NPA (%)

0.54%

1.45%

Return on Assets

1.52%

1.32%

Net Interest Margin

3.56%

2.79%

Advances
Total Business
CASA

Key highlights
Total Business increased by 28.1% from Rs.139133.7 Mn to Rs.178193.1 Mn
CASA position grew by 42.3% to Rs.21672.4 Mn from Rs.15234.0 Mn
Net NPA brought down to 0.54% from 1.45% last year
ROA increased to 1.52% from 1.32%

23

Direction

Q1 FY11 performance A snapshot

Financial Performance Q1 FY 11 Vs Q1 FY 10
Particulars

Q1 FY 11
( in INR mn)

Q1 FY 10
( in INR mn)

Absolute
Growth

% Growth

Net Interest Income

921.7

562.7

359.0

63.8%

Other Income

321.2

259.4

61.8

23.8%

Operating Exp

456.9

349.6

107.3

30.7%

Operating Profit

786.1

472.5

313.6

66.4%

Net Profit

443.7

315.4

128.3

40.7%

Key highlights
Q1 FY 2011 Net interest income increased by 64% over previous Q1 FY 2010
Operating Profit increased by 66% (YoY)
Net Profit increased by 41% (YoY) from Rs.315.4 mn to Rs.443.7 mn

24

Direction

Strong deposit and advances growth

Steady increase in deposits

Steady increase in advances

0%
R3
CAG

7%
R2
CAG

Steady increase in CASA

Advances has been growing steady at a CAGR
of 27% in the last 5 years; Credit Deposit ratio
7%
R2
CAG

is sound at 67%
Deposits is retail oriented. Stable and growing
at a CAGR of 30%
CASA grew by 44.94% in FY 2010 at a CAGR
of 27%.

CUB has reported strong growth in deposits and advances in the last few years

25

Strong growth in income and profitability

Strong growth in other income

R:
CAG

CEB & Charges Income over 5 years

34%

C AG

Steady increase in net interest income

9
R: 1
CAG

6%
R: 2

Robust PAT growth

CAG

26

7
R: 2

Cost of deposits & yield on advances

Cost of deposits and yield on advances in last 10
years

Spread between cost of deposits and yield on advances of our bank maintained in the last 10 years

27

Investments At a Glance
Investments Breakup and Category wise
Particulars (Rs in Mn)
SLR

Q1 FY 11

Q1 FY 10

% of
Change

27,634.5

23,774.1

16.2%

6,510.6

4,334.5

50.2%

34,145.1

28,108.6

21.5%

7.1%

7.2%

3,042.0

7,502.5

-40.6%

-HTM

31,003.5

20,606.1

50.46%

-HFT

99.6

0.0

34,145.1

28,108.6

M D AFS

2.31

1.76

M D HTM

5.88

6.39

Non SLR
Total Investments
Total Return on
Investments
Investments Breakup:
-AFS

Total Investments

21.9%

M D HFT
6.03
In total Non-SLR securities of Rs.6510.6 Mns, investment in NABARD RIDF constitutes Rs.5782.6 Mns.
M D Overall
5.48
4.98
Modified Duration for entire investment portfolio is 5.48 only.

28

Loan book Major Industry wise exposure

Advances to Major Industries as on 30th June 2010
Amount
Loans Composition (in INR mn)

% to Total
Advances

Construction (Comm
Real Estate)

2,501

3%

Textiles

8,346

12%

Food Processing

1,368

2%

Iron & Steel

3,183

4%

Paper & Paper products

1,550

2%

Other Metal & Metal

Products

1,147

2%

Other Industries

2,255

3%

29

Loan book Major Sector wise Exposure & Regulatory Classification

Major Sector wise Advances as on 30th June, 2010
Amount
( in INR mn)

% to Total
Adv

23,918.4

33%

Agriculture

7,588.3

11%

Large Industries

3,950.8

5%

Retail Traders

6,930.7

10%

Wholesale Traders

8,138.6

11%

Major Sector
MSME

SME and retail trade loans earning higher

yields.
Diversified credit portfolio reduces credit risk
Lower ticket size backed by adequate
collaterals
Unsecured Advances around 3% only

Regulatory Classification of Advances as on 30th June,

2010
Amount
( in INR mn)

% to Total
Adv

Corporates

24,876.8

34%

Regulatory Retail

30,707.8

43%

1,902.9

3%

14,609.0

20%

Classification

NBFC
Other Advances
Gross Loans Total

72,096.5

30

Loan book products composition

Loan Products composition as June 30, 2010

Amount
( in INR mn)

% to Total
Adv

Demand loans

17,046.4

23%

Term loans

25,701.8

36%

Overdraft / Cash credit

28,066.7

39%

1,281.7

2%

Loan Products Combination

Bills Purchased / Discounted

Gross Loans Total

72,096.6

31

Working capital loans yielding higher

interest constitute 60% of advances
Re-pricing possible at short intervals thus
reducing interest rate risk
~80% of our loan book is on floating rate
basis which reduces interest rate risk

Asset quality is showing continuous improvement

NPA AN ANALYSIS LAST 5 YEARS
Gross NPA & Net NPA %

Gross NPA & Net NPA - Quantum

Asset quality has shown continuous improvement over the years; Gross NPA has come down from 5.9% in
March 05 to 1.4% in March 10
Net NPA levels has come down from 3.4% in March 05 to 0.6% in March 10
NPA levels has come down despite the fact that we continue to focus on SMEs and retail trade loans.
We have a well defined and robust credit appraisal policy and risk management system

32

Restructured Accounts
Details of Restructured Accounts

No .of Borrowers
Restructured in I Phase FY 2008-09
Restructured in II Phase FY 2009-10
Total

Amount
( in INR mn)

213

3,187.9

51

1,655.6

264

4,843.5

Out of the above,

Accounts closed till 31.03.2010

89.0

Accounts turned as NPA

181.3

Amounts repaid till 31.03.2010

885.6

Balance outstanding as at 31.03.2010

3,687.6

The Restructured accounts are performing well and certain accounts got closed well before the due date.
Around 18% of amount repaid in restructuring accounts.
Around 3.7% of restructured accounts turned NPA.
We have not restructured any account during the first quarter of 2010-11.
Accounts turned as NPA during the first quarter of 2010-11 was NIL.
Balance outstanding on Restructured Accounts as on 30th June 2010 Rs.3474.6 Mns

33

Income and Expenses break up

Interest income break up

March 10
( in INR mn)

Particulars

March 09
( in INR mn)

Interest on Loans

7,558

6,553

15.3%

Interest on
Investments

1,937

1,424

36.0%

71

67

5.97%

9,566

8,044

18.9%

Other Interest Income

Total expenses

Other income break up

Expenses break up

March 10
( in INR mn)

March 09
( in INR mn)

CEB & Charges

690

598

15%

Treasury Income

458

480

- 4.6%

Suit Recoveries

260

141

84%

27

18

50%

1435

1237

16.0%

Particulars

Others
Total Other
Income

% Change

34

%
Change

Particulars
Interest expended

March 10
( in INR mn)

March 09
( in INR
mn)

% Change

6,785

5,618

20.8%

Employee cost

801

650

23.2%

Other operating
exp

857

746

14.9%

8,443

7,014

20.4%

Total expenses

Increasing employee efficiency

Growth in business per employee

Steady rise in profit per employee

Our employee efficiency has been going up continuously as reflected by the above parameters

35

5. Strategy

36

Our four pronged strategy going forward

Deposits

Advances

Achieve 30% growth in deposits &

increase low cost deposits from 20% at
present to 25% over 3 years

Maintaining focus in retail/SME

sectors at around 65%

Broad base retail depositors to ensure

stability

Continuing the high yielding cash

credit component at around 60% of
advances

To improve depositor base from 0.8 mn

to 1.25 mn; Focus on cross selling of
products

Income

Expenses

Continued focus on high yielding retail &

SME credits

Improving staff productivity to lower

Improving fee income by way of exchange

& commission on non funded business

Tight vigil on miscellaneous

Achieve steady growth of 25%

man power cost

expenditure

Increase fee income from cross selling of

insurance, mutual fund products, Online
Share trading money transfers & other
technology based services

Maintain cost income ratio at the

present level of 40% (lowest in the
industry)

Our strategy is to focus on all these four aspects of banking business to capitalize on the growth opportunities
going ahead

37

6. Recognitions

38

Ranking by Magazine The Chartered Financial Analyst

39

No.1 in Customer Satisfaction awarded by IBA

Indian Banks Association awarded City Union Bank as No.1
in Customer Satisfaction Study for IBA 2008 conducted by
GALLUP consulting.
Rank of Banks Index Bank within Clusters
Clusters 5 + 6
City Union Bank

96

Tamilnad Mercantile Bank

96

Karur Vysya Bank

94

Yes Bank

93

Ratnakar Bank

93

Lakshmi Vilas Bank

93

Indus Ind Bank

91

Nanital Bank

91

HSBC

88

Kotak Mahindra Bank

88

40

Thank You