City Union Bank: Celebrating 120 Years with Strong Q2 & H1 FY26 Performance

City Union Bank Limited, a venerable institution with a 120-year legacy in Indian banking, has reported a robust performance for the second quarter and half-year ended September 30, 2025. The standalone unaudited financial results highlight significant growth across key metrics, coupled with a notable improvement in asset quality. The bank's management, in its recent earnings call, underscored a period of consistent double-digit growth and strategic advancements, reinforcing its position in the competitive banking landscape.

For Q2 FY26, the bank's deposits witnessed a substantial 21% year-on-year increase, reaching INR 69,486 crore. Advances also grew impressively by 18% year-on-year, touching INR 57,561 crore. This propelled the total business to INR 1,27,047 crore, marking a 20% growth. The Net Interest Margin (NIM) for the quarter stood at 3.63%, reflecting effective interest rate management. Profitability metrics were strong, with Return on Assets (ROA) at 1.59% and Return on Equity (ROE) at 13.35%. Earnings per share (EPS) for Q2 FY26 was INR 4.43. The bank's capital adequacy remains robust, with a CRAR (Basel III) of 21.68% and Tier I capital at 20.71%, providing a solid foundation for future growth.

Asset Quality and Strategic Focus

One of the most significant highlights of the quarter is the remarkable improvement in asset quality. Gross NPA declined to 2.42% from 3.54% in Q2 FY25, and Net NPA reached a decade-low of 0.90%, down from 1.62% in Q2 FY25. This marks the first time in 46 quarters that Net NPA has fallen below 1%. The bank's Provision Coverage Ratio (PCR) with Technical Write-off (TW) improved to 82% from 75% last year, demonstrating proactive risk management. Management emphasized that the trend of recoveries surpassing slippages is continuing, with total recoveries of INR 303 crore against slippages of INR 156 crore in Q2 FY26, resulting in negative credit costs.

The bank's core focus remains on lending to MSME, Retail, and Wholesale Trade, with a granular asset profile that includes short-term and long-term loans to the agricultural sector. The management highlighted that its specialized business model, coupled with prudent risk management, has resulted in a stable liability profile and lower NPAs due to collateralized loans and single-banker relationships. The bank's branch network is extensive, with a pan-India presence of 889 branches, including a strong foothold in South India with 740 branches.

Digital Transformation and Future Outlook

City Union Bank is aggressively pursuing digital transformation, unveiling several innovative banking solutions at the Global Fintech Fest. Key initiatives include 'CUB Desire,' a systematic savings plan for both CUB and non-CUB customers; 'CUB Depend,' a fully digital, secured CreditLine on UPI backed by fixed deposits; and an AI-enabled MSME Corporate Card for smarter expense management. The bank is also enhancing UPI functionalities with features like multi-signatory transactions, Aadhaar-based face authentication, and cash withdrawals at Micro ATMs using UPI QR. These digital offerings aim to improve customer convenience, expand reach, and streamline operations.

Looking ahead, the management provided a positive outlook, guiding for mid-teen growth, approximately 2-3% above the industry average. The NIM is expected to remain stable with a positive bias in Q3 and Q4, and ROA is projected to stay around 1.5%. The bank is also venturing into renewable energy financing, with a commitment of USD 50 million from IFC to support MSMEs in energy-efficient solutions, aiming to build a INR 2,500 crore book in this segment over the next 24-30 months. This strategic partnership aligns with India's goal of achieving carbon net zero by 2070, positioning the bank for sustainable growth.

City Union Bank's Q2 and H1 FY26 performance reflects a period of strategic clarity and disciplined execution. The bank's consistent growth, improving asset quality, and proactive digital initiatives underscore its commitment to long-term value creation and maintaining investor trust in a dynamic financial environment.