‘City Union Bank’s FY23 growth target hit by slowdown in capex cycle’

N. Kamakodi
| Photo Credit: BIJOY GHOSH

City Union Bank Ltd. (CUB) is likely to miss its credit growth target of 15-18% by a small margin for the current fiscal due to a delay in start of investment cycle, said MD & CEO N. Kamakodi.

“The capacity utilisation of the manufacturing sector, according to RBI’s policy, is about 75% and the investment cycle will start once it crosses the 80%-mark,” he said in an interview.

Earlier, Mr. Kamakodi had said that CUB would try to push the growth pedal and achieve 15-18% credit growth for FY23 assuming that the investment cycle would start from Q3.

Observing that there there could be a few months’ delay in the lender’s projected growth, he said, “Whatever we had projected, could be a shade lower. But overall, things are slowly progressing, but not at the level we were expecting.”

To a question, he said that it did not make sense to push for the growth at this point of time without a corresponding growth in deposits. It has to be balanced.

“We still have capacity to grow by ₹3,000 crore without increasing our deposits, which will be pushing our credit deposit ratio over 90%. But we are not. Our risk appetite doesn’t allow us to push so far,” he said.

According to him, the overall slippages for FY23 was expected to be in the range of 2.5-2.8%. But due to the divergence reported accounts, it had increased slightly. Next year, it should be below 2.5% and probably moving towards the pre-COVID level in stages.

Dr. Kamakodi said that the low-cost carrier SpiceJet was paying its dues as per the schedule. Till date, it had repaid ₹34.4 crore and the current outstanding is ₹65.6 crore. The final instalment is scheduled to be received by June.

CUB’s provision coverage ratio improved to 67% and the bank was pushing it to more than 70%. The net interest margin will stay around the current levels of 4%, and RoA at about 1.5%, he said.

“Even after absorbing an additional sum of ₹40 crore towards divergence marked accounts, we have posted profitability growth, reduction in NPA and increase in provision coverage ratio sequentially. This augurs well for the bank,” he said.