investor presentation – november 2010. disclaimer no representation or warranty, express or...
TRANSCRIPT
Investor Presentation – November 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 bank’s general business plan’s 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 bank’s 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, modify or otherwise change in any manner the content of this presentation, without obligation to notify any person of such revisions or changes. This presentation should not be copied and/or disseminated in any manner.
Table of contents
1. City Union Bank – Overview & Growth Story 4-8
2. Ownership Pattern 9-10
3. Management 11-14
4. Financial Performance 15-33
4
1. City Union Bank – Overview & Growth Story
5
Showcasing steady performance on an ongoing basis …
RoA and RoE at 2% and 27% respectively for Q2 2010-11, which is considered healthy in the banking space
Steady growth – Business growing at a CAGR of 27% and Net Profit at a CAGR of 30% in last five years
Significant improvement in asset quality over the years. Net NPA – 0.54% for Sep 2010 and PCR > 70%
Future plans for expansion of branch network to 500 Branches in next 3 years
Rapid progress on the technology front with 100% business under CBS and State of the Art Technology platform
CUB is well positioned to capitalize on the huge growth opportunities in the banking sector
Well capitalized; CAR – Basel II – 13.41% as on September 30, 2010
Long and consistent track record of profitability – Profit and dividend payout in all 100 + years of operations
Best Corporate Practices; All Independent & Professional directors; Continuity in Management – only 6 CEOs so for
6
Key milestones
Take over of Common Wealth Bank Limited
1957
Preferential allotment for equity shares strengthening bank’s capital adequacy ratio
2007
1904
Incorporation of the Bank
1965
Amalgamation of ‘The City Forward Bank Limited’ and ‘The Union Bank Limited’ with our Bank
1998
Initial Public Offering (IPO); Listing Bank’s shares on the BSE, NSE & MSE
Entered into agreement with TCSfor core banking solution “Quartz”
2002
2003
Obtained licenses to act as a agent for procuring life insurance & general insurance business
Rights issue for equity shares @ 1 : 4 – to reward the existing shareholders
2009
1945
Scheduled bank since 22.03.1945
7
Strong presence in the South
A network of 229 branches of which 200 branches are located in South India and 146 in Tamil Nadu alone
StateNo of
BranchesStatewise % of Branches
% of our Business
Tamil Nadu 146 64 71
Andhra Pradesh 29 13 9
Karnataka 15 7 6
Maharashtra 12 5 7
Kerala 10 4 2
Gujarat 6 2 1
Others 11 5 4
Total 229 100 100
State wise branches
8
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 be in Tier I and Tier II centres and 22 branches in Tier III to VI centres.
Till 15th November 2010, we have opened 7 branches in Tamil Nadu out of license received for 62 branches.
Remaining 55 branches yet to be opened.
StateTier I & II centres
Tier III to VI centres
Tamil Nadu 16 19
Andhra Pradesh 5
Karnataka 5
Maharashtra 4
Chattishgarh 1
New Delhi 2
Orissa 1
Punjab 1
Uttar Pradesh 1
Total 36 19
State wise Branch Expansion planned
9
2. Ownership Pattern
10
A well diversified investor base
Ownership profile as on 30th September 2010 Shareholders % holding
LIC of India 4.97
L & T Capital Holdings Limited 4.78
F M O, Nederlands 4.67
Argonaut Ventures 3.94
Ares Investments 3.39
Acacia Partners Lp. 3.03
GMO Emerging Illiquid Fund 1.63
Karur Vysya Bank 1.45
Wasatch Core Growth Fund 1.28
ING Vysya Life Insurance Company 1.15
Major Institutional shareholders as on 30th September 2010
Well diversified ownership
Long term investors ensuring stability 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
Chairman’s Group holding reduces to 9.42%
11
3. Management
12
Transparent ‘Corporate Governance’ practices
All directors are Independent and Professional directors
Code of conduct for directors and senior management put in place
Disclosure norms strictly adhered to
Various sub-committees of Board functions to oversee the operations of the Bank
KYC / AML norms strictly complied with. No penalties / fines for any violation.
13
A well experienced and strong Board (1/2)
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. Balasubramanian, MD & CEO
He holds a Master degree in Mathematics, CAIIB and PGDFM and has 38 years of experience in the banking industry. He had joined City Union Bank in 1971 as a probationary officer and has since then 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. 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
We have eminent personalities on our Board;
1 Former Chairman of a PSU Bank
2 Chartered Accountants
2 Agriculturists
1 Industrialist
1 Advocate
1 Retired High Court Judge
1 Banking professional
Profile of Board of Directors
14
A well experienced and strong Board (2/2)
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. 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,Director
He retired as a whole time member of the Insurance Regulatory and Development Authority (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.
Profile of Board of Directors
15
4. Financial Performance
16
FY10 performance – A snapshot
HIGHLIGHTS FOR THE QUARTER ENDED 30th SEPTEMBER 2010
Deposits increased by 28.7% to Rs.114,941 Mn from Rs.89,332 Mn
Advances surged by 38.5% from 58,058 Mn to 80,393 Mn
Total Business grew by 32.5% from Rs.147,390 Mn to Rs.195,334 Mn
CASA improved by 26.7% to Rs.22,600 Mn from Rs.17,843 Mn
Highest Quarterly Profit in the Bank’s history
Net Profit increased by 35% from Rs.458 Mn to Rs.616 Mn
Net NPA lowered to 0.54% from 1.16% (YoY)
Highest ROA at 1.98% up from 1.86% (YoY)
Net Interest Margin higher at 3.74% from 2.79% (YoY).
17
ParticularsSEP 2010
( in INR mn)SEP 2009
( in INR mn)AbsoluteGrowth
% Growth
Direction
MAR 2010(in INR
mn)
Deposits 114,941 89,332 25,609 28.7% 102,846
Advances 80,393 58,058 22,335 38.5% 68,967
Total Business 195,334 147,390 47,944 32.5% 171,813
Demand Deposit 9,727 8,268 1,459 17.6% 10,970
Savings Deposit 12,873 9,575 3.298 34.4% 11,512
CASA 22,600 17,843 4,757 26.7% 22,482
Gross NPA 1,011 1,154 -143 935
Net NPA 428 666 -238 397
Gross NPA (%) 1.26% 1.99% 1.36%
Net NPA (%) 0.54% 1.16% 0.58%
CRAR – Basel II 13.41% 14.08% 13.46%
CD Ratio 69.94% 64.99% 67.06%
P C R 72.44% 53.51% 71.56%
30th September 2010 performance – A snapshot
Financial Performance – 30th September 2010 Vs 30th September 2009
18
ParticularsQ2 FY 11
( in INR mn)Q2 FY 10
( in INR mn)AbsoluteGrowth % Growth Direction
Net Interest Income 1,040 591 449 75.9%
Other Income 439 493 -54 -10.9%
Operating Expenses 529 444 85 19.2%
Operating Profit 950 641 309 48.3%
Net Profit 616 458 158 34.6%
R O A 1.98% 1.86%
R O E 27.31% 25.58%
Q2 FY11 performance – A snapshot
Financial Performance – Q2 FY 11 Vs Q2 FY 10
NII increased by 76%
Operating Profit increased by 48% (YoY)
Net Profit grew by 35%
ROA at 1.98% and ROE at 27.31% highest in the Banking Industry.
Key highlights
19
ParticularsH1 FY 11
( in INR mn)H1 FY 10
( in INR mn)AbsoluteGrowth % Growth Direction
Net Interest Income 1,962 1,154 808 70.0%
Other Income 761 753 8 1.1%
Operating Expenses 986 793 193 24.3%
Operating Profit 1,736 1,113 623 56.0%
Net Profit 1,060 773 287 37.1%
R O A 1.75% 1.60%
R O E 24.09% 22.10%
H1 FY11 performance – A snapshot
Financial Performance – H1 FY 11 Vs H1 FY 10
NII increased by 70%
Operating Profit increased by 56%
Net Profit increased by 37%
Healthy ROA at 1.75% and ROE high at 24.09%
Key highlights
20
Particulars Q2 FY 2010-11 H1 FY 2010-11 Direction FY 2009-10
Cost of Deposits 6.84% 6.83% 7.73%
Yield on Advances 12.51% 12.44% 13.04%
Yield on Investments 6.65% 6.60% 7.84%
Net Interest Margin 3.74% 3.64% 3.15%
Cost to Income 35.77% 36.22% 39.33%
Operating Exp - as a % of NII 50.87% 50.25% 59.63%
Return on Assets (ROA) 1.98% 1.75% 1.52%
Return on Net worth (RONW) 27.31% 24.09% 20.55%
Per Employee Business ( in INR mn) 72.56 72.56 65.10
Per Employee Profit (in INR mn) Ann 0.92 0.79 0.58
EPS (in INR.) – FV INR1/- Share 1.54 2.65 4.03
Key business indicators
Key indicators
21
CUB has reported strong growth in deposits and advances in the last few years
Advances (INR bn)
2533
45
56
68
80
0
15
30
45
60
75
90
Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Sep-10
Deposits (INR bn)
3547
64
82
103115
0
20
40
60
80
100
120
Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Sep-10
Strong deposit and advances growth
Steady increase in advancesSteady increase in deposits
Deposits - stable and retail oriented. Growing
at a CAGR of 30%
CASA recorded 27% growth for Sep 2010
(YoY)
Advances growing at a CAGR of 29% in the
last 5 years; Credit Deposit ratio is sound at
69%
CAGR – 30%
CAGR – 29%
CASA (INR bn)
8
1113
16
22 23
0
5
10
15
20
25
Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Sep-10
Steady increase in CASA
CAGR – 22%
22
PAT (INR Mn)
564718
1,017
1,221
1,528
1,060
0
300
600
900
1,200
1,500
Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Sep-10
Strong growth in income and profitability
Steady increase in net interest income Robust PAT growth
Strong growth in other income
CAGR: 23% CAGR: 30%
CAGR: 34%CAGR: 27%
CEB & Charges Income over 5 years
Half year figures (Not Annualised)
23
9.86
8.96 8.74
7.89
6.96
6.085.75 5.95
7.23
7.987.73
6.83
15.06
13.75
12.58
11.7211.36
11.00 10.8511.32
12.82
13.4613.04
12.44
4.0
6.0
8.0
10.0
12.0
14.0
16.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Sep-10
CoD YoA
Cost of deposits and yield on advances in last 10 years
Cost of deposits & yield on advances
Spread between cost of deposits and yield on advances of our bank maintained in the last 10 years
24
Particulars (Rs in Mn) SEP-10 MAR-10 SEP-09
SLR 28,819 25,788 25,661
Non SLR 6,575 6,397 4,257
Total Investments 35,394 32,185 29,918
Yield on Investments 6.6% 6.5% 6.4%
Investments Breakup:
- A F S 4,954 3,928 5,914
- H T M 30,389 28,256 23,959
- H F T 51 0 46
Total Investments 35,394 32,184 29,919
M D – AFS 2.86 2.89 2.09
M D – HTM 5.81 5.98 6.23
M D – HFT 6.46 - 7.15
M D – Overall 5.31 5.49 5.30
Investments – At a Glance
Investments Breakup and Category wise
In total Non-SLR securities of Rs.6,575 Mns, investment in NABARD RIDF constitutes Rs.5,924 Mns.
Modified Duration for entire investment portfolio is 5.31 only.
25
Loans CompositionAmount
(in INR mn)% to Total Advances
Construction (Comm Real Estate) 3,561 4%
Textiles 8,426 11%
Food Processing 1,390 2%
Iron & Steel 3,760 5%
Paper & Paper products 1,798 2%
Other Metal & Metal Products 1,332 2%
Other Industries 2,480 3% Textiles, 11%
I ron & Steel, 5%
Food Processing,
2%
Construction, 4%
Paper & Paper
Products, 2%
Other I ndustries,
3%
Other Metals, 2%
Advances to Major Industries as on 30th September 2010
Loan book – Major Industry wise exposure
26
Loan book – Major Sector wise Exposure & Regulatory Classification
ClassificationAmount
( in INR mn)% to Total
Adv
Corporates 27,287 34%
Regulatory Retail 33,656 42%
NBFC 2,411 3%
Other Advances 17,039 21%
Gross Loans Total 80,393
Regulatory Classification of Advances as on 30th September, 2010
Major SectorAmount
( in INR mn)% to Total
Adv
M S M E 25,912 32%
Agriculture 9,401 12%
Large Industries 4,679 6%
Retail Traders 8,043 10%
Wholesale Traders 9,487 12%
Major Sector wise Advances as on 30th September, 2010
SME and trade loans earning higher yields
constitute 54%.
Diversified credit portfolio reduces credit risk
Lower ticket size backed by adequate
collaterals
Unsecured Advances aggregate to 3% only
27
Loan book products composition
Loan Products CombinationAmount
( in INR mn)% to Total
Adv
OD/CC and Demand Loans 46,263 58%
Term loans 32,489 40%
Bills Purchased / Discounted 1,641 2%
Gross Loans Total 80,393
Demand
loans
23%
Overdraft/Ca
sh credit
34%
Bills
purchased/di
scounted
2%
Term loans
41%
Working capital loans yielding higher
interest constitute 58% 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
Loan Products composition as September 30, 2010
28
Asset quality is showing continuous improvement
Smart improvement in Asset quality over the years; Gross NPA has come down from 5.9% in March’ 05 to
1.3% in September ’10
Net NPA level brought down to 0.5% in September ’10 from 3.4% in March’ 05
We have a well defined and robust credit appraisal policy and risk management system
Gross NPA & Net NPA - Quantum Gross NPA & Net NPA - %
130.69
112.83
87.07 82.93
102.0893.50
101.11
67.79
49.80
36.2544.46
61.11
39.67 42.79
0
20
40
60
80
100
120
140
Gross NPA Net NPA
Gross NPA 130.69 112.83 87.07 82.93 102.08 93.50 101.11
Net NPA 67.79 49.80 36.25 44.46 61.11 39.67 42.79
2005 2006 2007 2008 2009 2010 Sep-10
5.89%
4.32%
2.58%
1.81% 1.80%1.36% 1.26%
3.37%
1.95%
1.09% 0.98% 1.08%0.58% 0.54%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
Gross NPA % Net NPA %
Gross NPA % 5.89% 4.32% 2.58% 1.81% 1.80% 1.36% 1.26%
Net NPA % 3.37% 1.95% 1.09% 0.98% 1.08% 0.58% 0.54%
2005 2006 2007 2008 2009 2010 Sep-10
NPA – AN ANALYSIS – LAST 5 YEARS
29
Restructured Accounts
Details of Restructured Accounts
No accounts Restructured in the last 5 quarters.
25% of the Restructured amounts already recovered (full cash recovery).
Only 2.9% of restructured accounts turned NPA and no addition from Restructured accounts in the last 5
quarters.
The Restructured accounts are performing well and certain accounts got closed well before the due date.
Out of Rs.4843 Mn in Restructured amounts, the amount collected upto September 2010 was Rs.1921 Mn.
Regular repayments received for more than one year in accounts with restructured balance of Rs.1640 Mn.
An amount of Rs.1697 Mn only in the Moratorium period of one year in entire Restructured Accounts.
Balance outstanding on Restructured Accounts as on 30th September 2010 – Rs.3337 Mns
30
Restructured Accounts
No .of BorrowersAmount
( in INR mn)
Restructured in I Phase – FY 2008-09 213 3,187.9
Restructured in II Phase – FY 2009-10 51 1,655.6
Total 264 4,843.5
Out of the above,
Accounts closed till 30.09.2010 699.5
Accounts turned as NPA 142.5
Amounts repaid till 30.09.2010 1221.9
Balance outstanding as at 30.09.2010 3337.0
Details of Restructured Accounts
Out of Rs.3337 Mn, accounts corresponding to Rs.1640 Mn have completed 1 year of principal
repayment after the moratorium period.
Rs.1232 Mn have completed more than 6 to 12 months of principal repayment after the moratorium
period.
Rs.401 Mn have completed 6 months of principal repayment after the moratorium period.
Only Rs.64 Mn yet to start principal repayment.
31
Income and Expenses break up – Q2 FY 11 Vs Q2 FY 10
Particulars Q2 FY 11Q2 FY
10% Change
March ’10
Interest expended 1,881 1,765 6.6% 6,785
Employee cost 247 224 10.3% 801
Other operating exp 282 220 28.2% 857
Total expenses 2,410 2,209 9.1% 8,443
Expenses break up
Particulars Q2 FY 11 Q2 FY 10%
ChangeMarch’ 10
CEB & Charges 244 148 64.9% 690
Treasury Income 24 287 -Ve 458
Others including Suit Recoveries 172 59 291.5% 260
Total Other Income 440 494 - ve 1,435
Other income break up
Particulars Q2 FY 11 Q2 FY 10 % Change March’ 10
Interest on Loans 2,292 1,853 23.7% 7,558
Interest on Investments 603 495 21.8% 1,937
Other Interest Income 26 8 325.0% 71
Total expenses 2,921 2,356 24.0% 9,566
Interest income break up (in INR Mn)
32
Income and Expenses break up – H1 FY 11 Vs H1 FY 10
Particulars H1 FY 11H1 FY
10% Change
March ’10
Interest expended 3,632 3,486 4.2% 6,785
Employee cost 478 405 18.0% 801
Other operating exp 508 388 30.9% 857
Total expenses 4,618 4,279 7.9% 8,443
Expenses break up
Particulars H1 FY 11 H1 FY 10%
ChangeMarch’ 10
CEB & Charges 455 280 162.5% 690
Treasury Income 79 370 -Ve 458
Others including Suit Recoveries 227 103 220.4% 260
Total Other Income 761 753 - ve 1,435
Other income break up
Particulars H1 FY 11 H1 FY 10 % Change March’ 10
Interest on Loans 4,407 3,694 19.3% 7,558
Interest on Investments 1,143 917 24.6% 1,937
Other Interest Income 44 28 57.1% 71
Total expenses 5,594 4,639 20.6% 9,566
Interest income break up (in INR Mn)
33
Increasing employee efficiency
Profit per Employee (INR Mn)
0.4 0.4
0.5 0.5
0.6
0.8
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Sep-10
Business Per Employee (INR Mn)
34.0 35.0
49.9
56.5
65.1
72.6
20
30
40
50
60
70
80
Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Sep-10
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
Annualised
Thank You