Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

* Losses Mount: City Union Bank (CUBK.IN) [City Union] reported a loss in FY 4Q20 of INR 954 mn, declining INR 2.9 bn or 150.0% linked quarter. Like most other Indian banks, the linked quarter headlines are pretty much the same. Results declined due primarily to an INR 3.7 bn (456%) increase in provisioning attributed to substantially weaker credit quality; and from an INR 528 mn (11.2%) decrease in net interest income due to decelerating loan growth and a 10 bp contraction in the NIM to 3.5%; and*Weak Credit and Poor Reserve Cover: It was a difficult quarter for City Union, as gross NPLs increased INR 2.3 bn or 19.2% linked quarter. Slippages rose INR 2.5 bn (109.5%) during the period due to the lockdown, and indicated that it offered a moratorium to customers on an opt-out basis which accounted for 48% of the portfolio by value. Net new NPLs increased INR 5.8 bn linked quarter for an annualized rate of growth of 196%. Reserve cover, in our view, is short by INR 6.0 bn in just FY 4Q20 alone.

* Losses Mount: City Union Bank (CUBK.IN) [City Union] reported a loss in FY 4Q20 of INR 954 mn, declining INR 2.9 bn or 150.0% linked quarter. Like most other Indian banks, the linked quarter headlines are pretty much the same. Results declined due primarily to an INR 3.7 bn (456%) increase in provisioning attributed to substantially weaker credit quality; and from an INR 528 mn (11.2%) decrease in net interest income due to decelerating loan growth and a 10 bp contraction in the NIM to 3.5%; and*Weak Credit and Poor Reserve Cover: It was a difficult quarter for City Union, as gross NPLs increased INR 2.3 bn or 19.2% linked quarter. Slippages rose INR 2.5 bn (109.5%) during the period due to the lockdown, and indicated that it offered a moratorium to customers on an opt-out basis which accounted for 48% of the portfolio by value. Net new NPLs increased INR 5.8 bn linked quarter for an annualized rate of growth of 196%. Reserve cover, in our view, is short by INR 6.0 bn in just FY 4Q20 alone.

City Union Bank

City Union Bank - Operationally Weak