City Union Bank Ltd (NSE: CUB) Q3 2025 Earnings Call dated Jan. 31, 2025
Corporate Participants:
Vijay Anandh R — Managing Director and Executive Director
N. Kamakodi — Managing Director and Chief Executive Officer
Analysts:
Margaret O’Gorman — Investor Relations
Shweta Upadhyay — Analyst
Vatsal Shah — Analyst
Siddharth Rajpurohit — Analyst
Sanjeev Damani — Analyst
Aman Mehta — Analyst
Parth Gutka — Analyst
Jay Satra — Analyst
Apoorva Pareek — Analyst
Gaurav Jani — Analyst
Rakesh Kumar — Analyst
Pritesh Bumb — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the City Union Bank Limited Q3 FY ’24-’25 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I would now like to hand the conference over to Ms Margaret from Ambit Capital. Thank you, and over to you, ma’am.
Margaret O’Gorman — Investor Relations
Good evening. And on behalf of Ambit Capital, I thank the management of Citi Union Bank Limited for the opportunity to host your Q3 FY ’25 earnings call. We have the following members of management with us today, Mr R. Vijay Anand, Executive Director; and Mr Jay, Chief Financial Officer. I will now hand over the call to the management, Mr Vijay Anand, Executive Director to walk us through the quarter.
Thank you all, and over to you, sir.
Vijay Anandh R — Managing Director and Executive Director
Good evening, everyone. Warm welcome to all of you for this con-call to discuss the unaudited financial results of Citi Union Bank for the 3rd-quarter financial year 2025. I thank my MD and CEO for giving the opportunity to get this Q3 call. I have been joined by my CFO, Mr Opun, in this call.
The Board approved the results today and I hope you have all received the copies of results in the presentation. At the beginning of the year, we shared our expectations for the current financial year ’25 as follows. With all the new digital initiatives supported by strengthened top and senior-level management, we expressed confidence to restore the credit growth on par with industry levels and go beyond. On asset quality front, the trend of reduced, coupled with improved recovery would continue for financial year 2025. We would reach between 1% to 1.25% net NPA for the financial year 2025 and would explore the possibility of improving the coverage ratio. It will also help us to maintain the PAT growth. Our ROA is back to our long-term average of 1.5% and it will continue.
For the current quarter Q3, we are almost on-track on our expectations, which we shared with you all earlier. We had registered 14.6% advanced growth in Q3 FY ’25 year-on-year and our gross advances has increased to INR50,409 crore from INR44,017 crore in Q3 FY ’24. As you are aware, we closed December ’22 with 12% credit growth, but growth decelerated in the calendar year 2023 and we almost closed December 2023 with 0% growth, in fact 2% growth year-on-year. Our growth restarted in Jan ’24 and reached double-digit growth for June 2024.
In the last quarter, we had registered 12% credit growth in Q1. We achieved 10% credit growth and for the current quarter, we have achieved around 15%, thereby, we have made a continuous double-digit growth for all the 3/4 in the current financial year. As stated in our earlier calls, our improved efficiency level aided by the digital lending process is helping us in a better way to achieve our consistent credit growth.
During last one year, out-of-the total credit growth of INR6,392 crores. 62% of the business came from core advances, while rest is from gold loans. Once the retail vertical and other avenues of advances start supporting us further in terms of our credit growth, we hope the trend will continue and it will also show the current level — current growth level in fact of minus 2% going-forward.
Our deposits have increased by 11% and stood at INR58,271 crores for Q3 ’25 as compared to INR52,726 crores for Q3 ’24. The CASA has increased by 5% year-on-year from INR15,359 crores to INR16,132 crores. So far, the concentration in the calendar year 2024 was to get the credit growth on-track, which has happened now. Parallelly, the efforts are on to take care of the deposit growth to support the required credit growth. Cost of deposits stood at 5.88% for Q3 ’25 versus 5.67% in Q3 FY ’24. And for nine months period, the same was 5.78% when compared to 5.51% last year.
Now the asset quality. On asset quality front, as we have stated earlier, the trend of recoveries continues to be more than slippages and this trend is continuing. For Q3 FY ’25, the total slippages stood at INR201 crore, while the total recoveries is close to INR249 crores, consisting of INR203 crore — out of INR249 crores, INR23 crores came from live NPA and INR46 crores came from technically written-off accounts, again resulting in negative slippages.
As a result, our gross NPA percentage sequentially decreased from 4.47% in Q3 FY ’24. We further reduced to 3.99% in FY ’24. Again, we further reduced to 3.88% in FY ’25, then we move on to 3.54% in Q2 in FY ’25 and now we have further reduced to 3.36% in the current quarter, technically from 4.47% in Q3 FY ’24 to 3.36% in the current quarter. Similarly, our net NPA number had reduced to crores and the net NPA percentage is 1.242% in Q3 FY ’25, which was 1.62% in Q2 FY ’25 and 2.19% in Q3 FY ’24 last year.
Overall SMA to total advance stands at 1.91% in the current quarter, which reduced from 2.03% in the last quarter of Q2 FY ’25. It appears that our strategy of not getting into unsecured retail is helping us in a big way to have a better-quality — asset quality, both in slippages as well as on SMA-2 numbers. Even though the PCR with TW has hovering over and about 70% for the last few quarters, our PCR without technical write-off now is 59% when compared to 55% in last quarter of Q2 FY ’25 and it was 51% in the last financial year Q3. So this means technically we have moved from 51% in the last year to 59% in Q3 of this year. PCR with technical write-off stood at 77%, which has improved from 71% last year. So with technical write-off, we have moved from 71% to 77% and without technical write-off, we have moved from 51 to 59.
Our interest income had grown by 12% in Q3 ’25 and increased to INR1,479 crores from INR1,326 crores in Q3 ’24. Our yield on advance stood at 9.81% for Q3 FY ’25 as against 9.62% for the same-period last year. Our NIM for Q3 FY ’25 stood at 3.58% as compared to 3.50% in Q3 FY ’24. NIM for nine months financial year ’25 is at 3.59% compared to 3.63% in the corresponding last year. As discussed in earlier calls, the margin should be 3.60% with plus or minus 10 basis-points. We hope to maintain the same trend as you might have seen in the last 50 to 60 quarters, 90% of the time, the net interest margin has always been in the range of 3.4% to 3.7%.
In the last financial year, that is FY ’23-’24, we had lower operating profit due to lower business growth and we have maintained our path with the help of improved recovery and reduced slippages. For the current quarter, our operating profit had grown by 20% and stood at INR436 crores compared to INR364 crores in the corresponding period last year. We have achieved a PAT growth of 13% and our PAT stood at INR286 crores for Q3 FY ’25 as against INR253 crores in Q3 FY ’24. The PAT for nine months FY ’25 is at INR836 crores, registering a growth of 10% as against the same-period last year.
Our next cost-to-income. Our cost-to-income ratio for Q3 FY ’25 is almost flat at 46.58% compared to 47.06% in Q2 FY ’25 and 48.64% in Q3 FY ’24. As said in earlier calls, the cost-to-income ratio will be in the range of 48% to 50% for FY ’24, ’25 and we hope it will start going down once the retail business start delivering results. ROE. Our ROA for Q3 FY ’25 is at 1.57% compared to 1.49% in the corresponding last year. We are back on-track with respect to ROE of over 1.5% in the past few quarters and aligned with the desired level. ROE2 has marginally improved from 12.57% in Q3 FY ’24 to 12.64% in Q3 FY ’25. As you are aware, we have a small portfolio of credit cards for our existing to bank customers. We form certain gaps in-product offerings and we have tried to align the same. As a result, we have tied-up with Chennai Super Kings CSK for co-branded credit cards and we are also in advanced discussion with another franchisee. I’m sure with the proposed offerings, we will make as a preferred card partner mainly for our existing customers. We propose to focus credit cards mainly for our existing customers. Recently, our bank had won seven awards in the recently concluded Annual Technology Conference and Citations 2024 held at Mumbai on 24th January 2025. CUB has got awards in all the seven categories from IBA for the second year in a row. The IBA Awards are aimed at rewarding best technology providers in the bagging industry, encouraging competition in the bagging industry to demonstrate the state-of-art innovative products, sense of purpose on bringing huge value addition in best practices for serving clientele. Our bank was the winner in best digital sales, payments and engagement, best IT risk management, best fintech and digital payment index adoption and best financial inclusion. We are the in the best A and ML adoption, while we got a special award under the category Best Technology Talent and Organization and Best Technology bank. To sum-up, we have crossed the industry level growth, credit growth, which was alluding us for the last couple of years. We expect that to stabilize and move forward. Operating profit has also started showing growth in tune with the business growth. Now we could see consistency across all parameters such as credit growth, net interest income, operating profit, PAT, NPA levels and cost-to-income. The current level of credit growth was achieved from existing MSME core business and JL, coupled with digital lending process and we hope it will improve once avenues of retail start delivering results. Again, our strategy of not getting into unsecured retail has definitely helped us to maintain the asset quality and we hope to maintain the same for future. Now our concentration will remain more focused on deposits front, which should support the credit growth going-forward. Thanks a lot. Any questions we are happy to take.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone phone. If you wish to remove yourself from the question queue, you may press star N2 participants are requested to use handsets while asking a question. Ladies and gentlemen we will wait for a moment while the question queue assembles. Again, if you wish to register for a question, please press and 1 participants, you may press star and 1 to ask a question. The first question comes from Shweta Opadia from Assit C Mehta. Please go-ahead.
Shweta Upadhyay
Hello, am I audible?
Vijay Anandh R
Yeah.
Shweta Upadhyay
Yeah. Good evening, sir. So just one question on this new tie-up that you have done with this CSK. With this tie-up, is the bank now will be focusing more on the unsecured portion because the unsecured portion of our portfolio seems quite less, like around 1% or 2%. So with this tie-up, are we starting to focus more on the unsecured portion? And if, yes, then up until what portion are we expecting to increase this unsecured portfolio out-of-the total loan book.
Vijay Anandh R
Good evening. The — as I have mentioned in the commentary, we are — we have existing customers who are using other bank credit cards. They are our core customers for the bank. We formed certain product features which are not available, which made them to use other bank cards. We just want to fix that gap, number-one.
Number two, as I mentioned earlier, we are going to focus this card only for our existing customers. This means we will be around 90-odd percent for our existing customer-base and maximum we will be around 10% for our new to bank customers. We don’t have any plans of getting into unsecured retail, personal loans or anything as of now? And this card is mainly for our existing to bank customers.
Shweta Upadhyay
Okay. And sir, just one more question. So are we on-track on the branch expansion that the bank has guided earlier?
Vijay Anandh R
Yes, we are on-track and more or less we should complete the financial year with whatever we have estimated. We would be around 850 to 875 branches as estimated at the beginning of the year-by March 31st.
Shweta Upadhyay
And will this branch expansion be happening in Samil Nadu and Southern regions itself or are we expanding the bank in other regions as well?
Vijay Anandh R
We are majorly focusing on North and West as well. It depends on the market what we are opening basically the data, what we receive, wherever there is a good opportunity for us in MSME business. And we are complete — we are focusing on North and West as well. It’s not only based only at Tamilla.
Shweta Upadhyay
Okay. Okay, sir. All right. Thank you.
Operator
Thank you. Thank you all participants. If you wish to register for a question, please press star and one on your touchstone phone. The next question comes from Watsal Paraksha from Nightstone Capital. Please go-ahead.
Vatsal Shah
Yeah, hi, good evening. So in retail, what are the products which we are looking to enter in and grow ourselves within.
Vijay Anandh R
So as mentioned before, we are looking at only secure products in retail. We are getting into loan against property, home loans, affordable home loans and micro loan flat.
Vatsal Shah
Okay. And we had also mentioned that for the northern part, we are going to appoint DSA. So have we appointed them and if he has been how has been their response?
Vijay Anandh R
So we have appointed and we are in the — it’s a continuous process. The test launch has already happened and the human capital is already deployed in North and West. We could see some results in the pilot launch in Q3. I think we have started pretty decently with our expectations. So DSE appointment is a continuous process, which we are doing it and we have already appointed the DSE.
Vatsal Shah
Got it. And on the restructuring portfolio, so you had said that you are going to take additional provision call after you will complete two years. So I guess two years have been completed. So have you taken any decision on that?
Vijay Anandh R
77 crores. We don’t need require as of now for this. INR77 odd crore.
Vatsal Shah
So you are not going to take any additional provision.
Vijay Anandh R
Is it as of now.
Vatsal Shah
Okay, got it. And more or less, could you give any number to what growth are we looking at over the next two, three years? Just a range for us to build-in.
Vijay Anandh R
So two, three years is quite long, but still we would be around 12% to 14% growth.
Vatsal Shah
12% to 14%. Okay. Got it. And much of it will come through retail, right?
Vijay Anandh R
No, no, MSME.
Vatsal Shah
No, no, the larger part of the growth. So we will grow faster in retail, right? So that’s —
Vijay Anandh R
We will do retail, but our focus on MSME continues. As we mentioned earlier, 2% to 2.5% 2% to 2.5% would be the retail Contribution in the overall — in the numbers for the year. So our focus on MSME continues. We don’t have any change in our portfolio competition.
Vatsal Shah
Okay, got it. Thank you.
Operator
Thank you. A reminder to all the participants, you may press star and one to ask a question.The next question comes from Siddharth Rajpurohit from YES Securities. Please go-ahead. MR. Sidad Rajpurohit, your line is unmuted. Please proceed with your question.
Siddharth Rajpurohit
Thank you for the opportunity. So this 2% to 2.5% retail contribution is what is the absolute level contribution that will happen in this year?
Vijay Anandh R
And on a total business.
Siddharth Rajpurohit
Yeah, the total advances of the total advances, around 6% to 2.5% will contribution will happen this yea.
Vijay Anandh R
The number-one we are looking at, contribution.
Siddharth Rajpurohit
Yeah, for FY ’26.
Vijay Anandh R
Yes, yes.
Siddharth Rajpurohit
Okay. And going-forward, how this contribution will rise?
Vijay Anandh R
We will be at 8% to 9% as we mentioned earlier in the next three, four years.
Siddharth Rajpurohit
Okay, sir. Okay. And during the quarter, we have seen that sequentially retail trader — retail traders or wholesale traders have come down. The advances have come down significantly in this segment. So are you seeing any stress in the low-ticket MSME or the wholesale traders side?
Vijay Anandh R
No, after this thing, registration certificate, they will eventually graduate the MSME.
Siddharth Rajpurohit
But are we seeing any stress in the low-ticket MSME space?
Vijay Anandh R
No, we don’t. We don’t. We are not seeing that.
Siddharth Rajpurohit
Okay. And on the deposit side, sir, we have seen a sharp fall in the car segment. Also there is a fall in SAF, but car has seen a sharp fall in specific reasons.
Vijay Anandh R
Yeah, there is a — as we said, that’s going to be the focus. That’s what we have mentioned in the commentary as well. That’s going to be the focus for the year. It’s in Q4 as well. We will get this — we will get this corrected for sure. There is some fluctuation. And government business, there are some fluctuations happening. We will get this corrected and that’s the focus area which we have mentioned in the commentary as well, if you recall.
Siddharth Rajpurohit
Do you guide any number in terms of growth in total deposits?
Vijay Anandh R
Sorry, we lost you in-between, sorry.
Siddharth Rajpurohit
Sir, could you guide any number for the growth of total deposits?
Vijay Anandh R
We are negative that 12% it will take care of the credit growth. That’s what we are looking at. Basically, our CD has to be around 85%. That’s the number which we are looking at net-debt.
Siddharth Rajpurohit
It is broadly matching the credit growth?
Vijay Anandh R
Yes.
Siddharth Rajpurohit
Okay. Okay, sir. Thank you for the opportunity, sir, and all the best.
Vijay Anandh R
Thanks.
Operator
Thank you. Participants, you may press star and one to ask a question. Our next question comes from Sanjeev Tamani from SKD Consulting. Please go-ahead.
Sanjeev Damani
Sir, good evening. The first question from my side is that do we do advances against gold also or not?
Vijay Anandh R
We give loan against gold.
Sanjeev Damani
So we have facilities in all branches to give advances against loan or only two branches are working like that.
Vijay Anandh R
So we have in most of the branches bearing metro.
Sanjeev Damani
Bearing metro. Okay, okay. Got it, sir. Secondly, sir, do we also advance construction advance to the builder also against mortgage of the development property?
Vijay Anandh R
Yes, we do. So we have a — we have a portfolio there. We also fund.
Sanjeev Damani
Okay. And you said that you want to focus more on MSME, that means it is a secured advance always because you must be taking pledge of their properties, plant and machinery, et-cetera, giving this kind of advance or do you also advance against inventories and finished products?
Margaret O’Gorman
We — as you rightly mentioned, it’s an MSME against collateral.
Sanjeev Damani
Okay. Okay. So it is fully secured.
Vijay Anandh R
Yes, it’s fully secured.
Sanjeev Damani
Last question is about the tie-up. When you use the word that you have made a tie-up with CSK means — I mean CSK is not into any financial, you have offered your card for CSK employees. I mean, can we say like this?
Vijay Anandh R
No, no, no, it’s a co-branded credit card, which we want to launch between CUB and CSK, both being the recruited branch and we would all like — we do not want to give any product features as now. Maybe in a week’s time, we will roll-out and you will get to know their up again.
Sanjeev Damani
Okay. So the CSK will do the marketing of the credit card and CUB.
Vijay Anandh R
Will probably come back to you within a week with a proper press release.
Sanjeev Damani
More clarification will come about this.
Vijay Anandh R
Argument today morning and we will come out with complete clarity on product features. Our branding everything within a week from now, you will get to hear from both CUV and CST.
Sanjeev Damani
Okay. And similarly, you are planning to tie-up like this with more organization where the card services will be provided by you and there will be some sort of brand-name along with yes, the start.
Vijay Anandh R
Yes.
Sanjeev Damani
Okay. Okay. And sir, last question is about the fact that RBI has recently given some relaxation to increase the liquidity in the market. So how much benefit our bank is going to get-out of it.
Vijay Anandh R
We should be getting around 250 CR.
Sanjeev Damani
Okay. So 250 CR will be more available with the bank to give advances.
Vijay Anandh R
Yes.
Sanjeev Damani
Okay. Thank you very much, sir. Thank you. Thank you. And all the best, sir.
Vijay Anandh R
Thanks.
Operator
Thank you. Participants, you may press star and 1 to ask a our next question comes from Aman from Dolat Capital. Please go-ahead.
Aman Mehta
Good evening, sir. I have few questions. First is, can you throw some light on your yield on advances, why there was an increase and what’s the yield trajectory you are seeing? Secondly, if I missed the special — the SMA-2 number. And can you give me the breakup of gold agri yield and non-agri gold yield?
Vijay Anandh R
So our yield on advances is 9.74 for nine months. For nine months 9.81% for the quarter. I’ll repeat it, 9.74 for nine months and 9.81% for the quarter. This is on yield on advances. With respect to SMA-2, we have 990 to 960.56 to be precise SMA-2 against 990 in September 24 goal only our gold loan yield you wanted between agree and non-agree right hello.
Aman Mehta
Yes, sir.
Vijay Anandh R
9.25 is for agri 10.25 is for non-agri.
Aman Mehta
Okay and what’s the yield trajectory you are seeing like?
Vijay Anandh R
The yield trajectory is going to be the same. We don’t see any increase. It’s going to be same.
Aman Mehta
Okay. And what was any specific reason for increase in this quarter?
Vijay Anandh R
We have been hovering around the same number and just a fluctuation of plus or minus 10 bps what we have been seeing. If you see — if you see Q2, we are at — we were at 9.81% and we have continued the 9.81% for Q3 as well. In Q1, we had a dip that made us for the year 9.74. Otherwise, we have been hovering at the same number.
Aman Mehta
Okay, sir. Thank you.
Vijay Anandh R
Thanks.
Operator
Thank you. A reminder to all the participants, you may press star N1 to ask a question.The next question comes from Parth from Axis Capital. Please go-ahead.
Parth Gutka
Yeah, sir. Congratulations on the quarter and thanks a lot for the opportunity. Just one question. With the introduction of the retail loans like LAP or housing, do we expect an increase in the yields going-forward considering these loans will come at a higher yield than the pure MSME loan?
Vijay Anandh R
No, sir. We don’t think so because in a blended HL, we’ll pull it down. We do — we in fact we compress. I don’t see any change in the yield with the retail.
Parth Gutka
Okay, sir. Thanks a lot.
Operator
Thank you. The next follow-up question comes from Shweta from Assit C Mehta. Please go-ahead.
Shweta Upadhyay
Sir, just one question. If you can help me understand how is the bank cost of deposit higher than the total cost of funds? Like the cost of deposit for the quarter and previously, if I see it stands at 5.88%, whereas the cost of funds is lower, it’s at 4.8%.
Vijay Anandh R
So cost of funds has all the liabilities. Cost of deposit is only the deposits. Own capital.
Shweta Upadhyay
Yeah, so ideally your cost of funds should also include the borrowings, which comes at a higher-cost than the deposits.
Vijay Anandh R
Right of resource what we have around INR8,000 crores, which is a free cost because of that the cost of funds stood at 4.88 and when you compare to the yield cost of deposit of 5.88%.
Shweta Upadhyay
What would be the bank’s cost of borrowing?
Vijay Anandh R
The cost of borrowing anywhere around 6.75 to 7.5 mainly because of the refinance. We don’t have any other title and all it’s only from refinance.
Shweta Upadhyay
Okay, all right. Thank you.
Operator
Thank you. The next question comes from the line of Atishay Chaudhary from ICICI Securities. Please go-ahead.
Jay Satra
Yeah, hi, sir. This is Jay here. Sorry if this question has already been asked or answered. So I wanted to check if you had any impact or how do you view this RBI circular on gold loan, which has been made a little bit more stringent and how does this — has that impacted growth in any particular way? And how do you see — have you had to made any changes in the product processes on both retail as well as agri side?
Vijay Anandh R
So we have been following this process for a couple of years. So this really did not impact us because in terms of process, in terms of LTV, in terms of data capturing, we have been strictly following this for the last 24 months, I would say. We are totally compiled. We don’t see any issues on the business going-forward as well. To answer your question, net netback, we are fully compiled already.
Jay Satra
And you did not have to change any product or maybe the LTV on agri or rollover or renewal for customers when it comes to renewal.
Vijay Anandh R
Nothing with respect to LTV or anything. We may have to just add one column for end-use of the loan. That’s the only change which we have done to capture. Otherwise, we don’t — we don’t need to change anything in terms of LTV or processes.
Jay Satra
Okay, sure. And sir, I mean, how do you look at the growth outlook considering that maybe you have some comfort on LDR and how are the new products that — I mean, where are we on the launch of new products and how do you see the overall growth momentum for the bank.
Vijay Anandh R
As we mentioned earlier, we want to be at 85% in LDR and we have been saying 12% to 14% is the growth, which we are focusing on. So we try to balance between these two and this growth predominantly comes from MSME, JL, retail. This is what the growth order which we are looking at. As we mentioned before, 2% to 2.5% is the number which we are looking in retail. So this is going to be our strategy and there is no change in what we have planned or what we have discussed earlier.
Jay Satra
And so whether that — I mean, have we — where are we on the launch of those products? Have these been commercially launched or I mean, if you can just elaborate there?
Vijay Anandh R
We have launched retail. We have did a decent pilot in Q3. As we have — I mean, as we have said before, we had a launch in Delhi as well as in Bombay. We have empanneled couple of DSAs who has started sourcing road against property for us. As we mentioned before, we don’t want to use DSAs or third-party sourcing for home loans. And we have also tied-up with DC in Jaipur for affordable home loans. So we are on-track on what we have planned earlier, earlier bearing 1/4 delay and this will continue to give results for us in retail.
And MSME, our strategy remains same and the growth is going to be same as what we have projected.
Jay Satra
And overall growth, I mean, how do you see FY ’26 overall growth?
Vijay Anandh R
That’s what we said, 12% to 14% is the number which we are looking at.
Jay Satra
Okay. And we are already past that number, right? I mean, as of 3rd-quarter, we are at building past that number.
Vijay Anandh R
Yeah. Yeah.
Jay Satra
But do you think.
Vijay Anandh R
We should be in the range of 12% to 14%, that’s what we have said. 1% to 2% here or there is always there in this. Now with retail coming in and adding, we should always be there.
Jay Satra
Okay, sure. Thank you so much.
Vijay Anandh R
Just to give an additional line, we will be 1% to 2% more than the industry. That’s what we wanted to be. Right, right.
Jay Satra
Appreciate, sir. Thank you.
Vijay Anandh R
Thanks.
Operator
Thank you. The next question comes from Apourva Parik from Equirus Securities. Please go-ahead.
Apoorva Pareek
Yeah, hi, sir. Many congratulations on the results and thank you for this opportunity. So I have two questions. One is that, let us say that in calendar year 2025, we expect some rate cuts to happen. How will this impact onto your product pricing with respect to primarily onto your two segments that is MSME and agri, that is how we should consider that how the product pricing from City Union Bank will be communicated into the market and their impact on and cost of deposits. Now because you have kind of now faced some problem with stickiness of deposits in the recent past. If the rates go down, do you see some more intensification of the actions or efforts to elect to advant deposit? This is the first question. And I’ll maybe ask the second question.
Vijay Anandh R
Okay. Our yield of 9.81 can drop-down to 9.7. This is what we have projected we expect 0.10 to 0.12 bps. This is what the number which we are doing it yearly, it will convert as short-term despite.
Apoorva Pareek
Okay.
Vijay Anandh R
We would move down from 9.81 to 9.7, that’s the number which we are looking at.
Apoorva Pareek
All right. And sir, as you said that you’re going to you’re kind of now focusing on expansion. However, on a quarter-over-quarter basis, your opex has remained flat. Now on one-hand, your employee costs have gone down on the other hand, your other opex has kind of not risen up. So how should the — so is there any operating leverage that we are missing or if you can just throw some light on that.
Vijay Anandh R
So actually, sorry, with respect to the establishment expenses, the actual valuation for Q3 was lower when compared to Q2 because of that, there was a decrease in the figure of around INR5 crore to INR6 crores. You can — can just take it around INR185 for the Q4.
Apoorva Pareek
185. All right, sir. Thank you so much for the opportunity and wish you all the best.
Operator
Thank you. A reminder to all the participants if you wish to register for a question please press on your touchstone phone. We have our next question coming from the line of Gaurav Jani from Prabhutas. Please go-ahead.
Gaurav Jani
Thank you. Congrats on a good quarter. And just one question. We are right now, at least past two quarters, we are at provisions of about 60 65 basis-points. Once you reach the targeted level of PCR, what sort of credit costs do you envisage on a normalized basis?
Vijay Anandh R
And you just we couldn’t hear you properly, sir. If you can just close to the question and close to the mic, please.
Gaurav Jani
Yeah, just a mic. Is this better?
Vijay Anandh R
Yeah, better. Yeah.
Gaurav Jani
Yeah, what I was asking is, after we reach a targeted level of PCR, right, so what sort of normalized credit cost are we estimating? Right now we are at about 65 basis-points. So yeah.
Vijay Anandh R
Our credit cards will remain flat. We don’t see any surge in this search.
Gaurav Jani
So what you’re saying is, sir, it would remain between 60 65 basis-points.
Vijay Anandh R
Correct. And we should also note that it depends on the economic cycle and depends on the slippage. And we expect it to remain now
Gaurav Jani
Perfect. That was good, sir. Thank you.
Operator
Thank you. Our next question comes from Rakesh Kumar from B&K Securities. Please go-ahead.
Rakesh Kumar
Yeah, hi.
Vijay Anandh R
Yeah, yeah, we can hear you.
Rakesh Kumar
Yeah. Yes, sir. So just on margin front, sir, so now we are going to have some changes in the credit and also there are.
Operator
Rakesh sir, even your line is breaking in-between.
Rakesh Kumar
Is it fine now?
Vijay Anandh R
Yeah, better.
Operator
Yeah, much better, please.
Rakesh Kumar
Yeah. So I was asking about margin trajectory, sir, like because the bank is undergoing change in the credit composition next year and then we have interest-rate cycle also. So how do we like look-ahead the margin trajectory in FY ’26, if we can give some rough guidance would be helpful.
Vijay Anandh R
As we mentioned in our commentary, we don’t see major change in the composition and we would be around plus or minus 10 days from 3.6.
Rakesh Kumar
3.6, okay, and credit cost guidance you are saying it cost me mostly around this level.
Vijay Anandh R
At this level.
Rakesh Kumar
Got it. Got it. And targeted PCR number would be what number we are looking at targeted PCR number, sir?
Vijay Anandh R
We are looking at 60.
Rakesh Kumar
60, sure. Understood. Thank you. Thank you so much, sir. Thank you. Thank you, sir.
Operator
Thank you. Participants, you may press star and one to ask a question next question comes from Rajpurohit from YES Securities. Please go-ahead.
Siddharth Rajpurohit
Thank you, sir can you guide on MS. Currently your recoveries and upgrades are almost equal to your slippages. So till what time you will see this case?
Vijay Anandh R
The slippages lesser than recovery, we expect it to happen for the next two quarters more or less.
Siddharth Rajpurohit
Okay. So for the H2 till H1, over the next year?
Vijay Anandh R
Yeah. Yeah, we can keep it at H1.
Siddharth Rajpurohit
And the rise in cost of deposits means can it what does it — the lower share of CASA, does it explains the right of rise in cost of deposits entirely?
Vijay Anandh R
Yes.
Siddharth Rajpurohit
Okay, sir. And can you give the LCR number, sir, average LCR for the quarter?
Vijay Anandh R
119, 119.
Siddharth Rajpurohit
Average.
Vijay Anandh R
Yeah.
Siddharth Rajpurohit
Okay. Thank you, sir. Thank you very much.
Operator
Thank you. Participants, you may press star and one to ask a question. The next question comes from Pritesh from DAM Capital Advisors. Please go-ahead.
Pritesh Bumb
Hi, sir. Good evening. Sir, just a question on fee side. Our fees to assets has been slightly improving volatile, but what is your sense that it will go from here on, given that the loan growth is still quite decent, but our fee is not that much — fee to assets is not that much better. So anything on that?
Vijay Anandh R
No, we don’t see INR510 crores is going to be the average jump, if at all. We see this as stable. And we have been almost on the same number for the last 3/4 and this trend should continue.
Pritesh Bumb
Yeah. So we were somewhere — so if I look at my number what is happening, we were somewhere around 1.0 to 1.1 last year, then we moved to from 1.1 to 1.2. So is there a trend that can still improve or will use — as you said that maybe we are only at about 1.2, 1.25?
Vijay Anandh R
No, we as mentioned before, we will be the same range between 1.2% in the range of.
Pritesh Bumb
Sure, sir. Second, sir, on the extension to that margin question, basically, if any upward biases we can see in margins or any product tweaking we can do for margins to move-up in terms of — in terms of where margins can settle, especially what happens in this February from the RBI side, anything on that?
Vijay Anandh R
So we don’t expect, as we mentioned before, the margin to go up for sure, because assets get repriced quickly. So if the rate cut happens, the asset gets repriced quickly and it takes at least three, four quarters for the liabilities to get that the benefit for the bank. Hence, we don’t expect that to happen. So that it’s going to be same. We don’t see. It gets compressed — converged at the short-term. So
Pritesh Bumb
Got it.
Vijay Anandh R
If it is going to be assets, it gets repriced quickly. So we don’t have an option. If there is going to be liabilities, then we have to wait for three, four quarters since I don’t see any scope in this.
Pritesh Bumb
Sir, if you can — if you have not disclosed this number, if you can mention how much is your EBLR, MCLR and other benchmark books if you have not disclosed this, can you — because I joined a bit late.
Vijay Anandh R
See, as of now, the ABLR around 45 percentage and the MCR around 30 percentage around 15 percentage as fixed-rate and 5 percentage towards the NPA, gross NPA.
Pritesh Bumb
Sorry, EVLR is 45%.
Vijay Anandh R
But it was reduced from 50 to 45 in the current quarter. Because the gold loan — non-agri portal mainly moved from EBLR to.
Pritesh Bumb
Okay. Gold loan has moved from EBLR to fixed-rate.
Vijay Anandh R
Yeah.
Pritesh Bumb
Okay. Okay, okay. Okay, sir. Yeah, that’s it from my side. Thank you so much, sir.
Operator
Thank you. A reminder to all the participants, you may press star and 1 to ask a question our next follow-up question is from Pritesh from DAM Capital Advisors. Please go-ahead.
Pritesh Bumb
Sorry, sir, just forgot to ask as you said that loan growth will be still decent enough, given that our margins will be a little bit under pressure when the rate outcomes happen. Is it prudent a bit to grow slower early-on in the — once the rate cuts start happening, you get a sense and then maybe move-up in terms of lending as a growth perspective, any thoughts on that?
Vijay Anandh R
So recent margins will be stable for the year as a whole. Yes. We said margins will be stable for the year as a whole.
Pritesh Bumb
Okay. Okay. So of course, here as a whole because your use, as you said that it will be a lagged basis, right, the liabilities will be price over-time.
Vijay Anandh R
And liabilities will get priced in two, 3/4 and assets get priced immediately, reprice immediately and hence margin will become — if you see for the full-year, this is going to stabilize because of the both the increase which we’ve done, one immediately, one within three, four quarters.
Pritesh Bumb
Okay, okay, okay. So we will continue to grow, but then you’re confident that the margins will come back with a lag by the end-of-the year.
Vijay Anandh R
As mentioned in my commentary also, we will be around 3.6%, which minus 10 bps. That’s the commentary which we have given when we were discussing the results. And we will continue to maintain that.
Pritesh Bumb
Sure, sir. Thank you so much. Thank you for that. Yeah. Thank you.
Operator
Thank you the next question comes from Gaurav Jani from Liad. Please go-ahead.
Gaurav Jani
Thank you again, sir. Just taking my question forward on asset quality actually. So we do have some tailwinds, right, in terms of recoveries because of the earlier or COVID stress right now. And assuming that within a couple of quarters that normalizes, how is actually asset quality shaping up in your area of operations, specifically Kamil, the segment you created to, which is MSME, right? So any sort of early signs of stress there and how are sort of credits shaping up. Yes, that is it. We’d like to have a qualitative comment from that thanks.
Vijay Anandh R
So as we mentioned before, for the next couple of quarters, our slippages will be less and recovery should be more. And as mentioned before, we will exit this year with 800 CR of slippages and next year we should close at 700 CR. Hello?
Gaurav Jani
No, sure, sir. I understood that. I didn’t mean in terms of numbers. I just thought how is the environment Is sort of tough, right? Otherwise, we are seeing sort of early signs of stress in some other segments in retail or probably not in MSME, but in retail. So any signs of stress in MSME that you’re looking at.
Vijay Anandh R
We will be stable for the first question and we don’t see — that’s what we have given the guidance of crores in for the next year. And in fact, our SMA numbers have come has come down substantially down. To be very precise, we were at we are at 4596.75 when we have closed the December ’24. So overall SMA is 01, 2. These figures have come down drastically. In fact, our September book SMA 012 was 52, 53. I’m saying both 01, 2, this 52, 53 has dropped to-4, 5 times. In fact, both SMA is 01 to put together, now we are in single-digit.
Gaurav Jani
Sure, understood, sir. That is it from my end. Thank you so much.
Operator
Thank you. Participants, you may press and one to ask a question the next question comes from Aman from Dolat Capital. Please go-ahead.
Aman Mehta
Yeah. Yeah. So just a follow-up question. I missed on your earlier comment with INR700 crores was of what guidance, sir?
Vijay Anandh R
Yes. Okay, okay. We have crores.
Aman Mehta
Okay.
Vijay Anandh R
Next year, we will be — look, we are looking at INR700 crores as slippages.
Aman Mehta
Okay. And the recovery guidance is intact, right?
Vijay Anandh R
Yeah, yeah.
Aman Mehta
Okay.
Operator
Aman sir, does that answers your questions?
Aman Mehta
Yes, yes. Thanks.
Operator
Thank you. Once again to register for a question please press star and 1 one. Our next follow-up question comes from Pritesh Boom from DAM Capital Advisors. Please go-ahead.
Pritesh Bumb
Sorry, sir, on the slippages side, you mentioned INR800 crores this year, right? We are at about INR55 crore already.
Vijay Anandh R
Correct.
Pritesh Bumb
So does that imply that — I’m not implying anything, but how do we see it in that sense is that it’s still INR250 crores of we have been
Vijay Anandh R
Averaging the numbers and we have given the numbers of INR800 crores for the year. All we are trying to say is we’ll be INR800 crores or less than that. That’s what we meant. We are at INR550 odd crores and the trend continues and we don’t see any spike in that.
Pritesh Bumb
Okay. But because already INR55 that means the implied slippage for Q3 was about INR200 and it’s still — if you don’t even hit that number, if you are like around INR700 crore also, it will be like similar range of what H1 was?
Vijay Anandh R
We see, we normally keep it as INR200 crore to INR25 crores. That’s the number with us. And that’s the reason why we — when we started this FY, we said INR800 crores we would be at. And we just want to clarify that we will be well within that what we have given it at the beginning of the year.
Pritesh Bumb
Right. Right. Sir, a second question was on — in terms of recovery from written-off pool, what kind of a pool we have right now? And what we have seen is that there has been slightly lower recoveries this time around in nine months. So any — any thought process on that? You said about recovery from normal slippages and normal GNPA to be intact as a price guidance. But what about the pool and how much can we get over there as well?
Vijay Anandh R
So we have INR1,400 crore book in the write-off pool. And our nine months actually is around INR154 crores to be precise and Q3 actually is INR46.2 crores.
Pritesh Bumb
Last statement I missed.
Vijay Anandh R
Our nine months actual is INR154.71 to be very precise, INR154.71 crores, absolute recoveries and for Q3, the actual figure is INR46.23 crores. And we have been hitting INR60 crore to INR80 crores on an average per quarter.
Pritesh Bumb
So we should build the same number going-forward as well.
Vijay Anandh R
Yeah.
Pritesh Bumb
We can do that easily.
Vijay Anandh R
Yes. Yes. That’s the number which we are looking at.
Pritesh Bumb
Got it, sir. And lastly, our cost-to-income has been relatively coming down. So we — this quarter also I think we are down and we are at about what do you see from here on in terms of cost-to-income? Do we see that it may inch up a bit and it may remain stable here. How do you think about it?
Vijay Anandh R
So we have been — we have given in the commentary as well, we would be around 48% to 50%. Our retail — for retail expenses need to take-off. So when the retail expenses takes off, we will be at 48% to 50% and when we start delivering, which will come back. We have already incurred retail expenses and we need to start getting money back for what we have invested.
Pritesh Bumb
So I’m sir, you said you have incurred the retail expenses and you’re waiting for. Okay. But — but what will it lead to that 48% to 50% type of cost-to-income because it seems to be that there will be some more investments in terms of opex.
Vijay Anandh R
So 48% to 50% is the number which we are looking at in CAR. That’s the number which we have been already — which we have been always been the trend.
Pritesh Bumb
Okay. Thank you. That’s it from my side. Thanks for answering all these questions. Thank you.
Operator
Thank you once again to ask a question please press star and 1 on your touchstone phone. Ladies and gentlemen, as there are no further questions, I now hand the conference over to the management for closing comments.
Vijay Anandh R
I now hand over my phone to my MD CEO for the closing remarks.
N. Kamakodi
Good evening, everyone and Dr here, thanks for attending this con-call. I would like to probably close with a few closing comments. The Q3 had been an wonderful quarter. We are able to get back the growth which was alluding us for quite some time. As Vijay explained, we had some amount of reducing growth in the calendar year ’23 from about 12% 13 percentage to about zero percentage. In ’24 calendar year, it improved in fact from, let’s say, 0% to 2 percentage to almost the 15 percentage whatever we have seen. So the growth is back to industry level plus 2 percentage, which is a very healthy sign. We hope we should be able to go-ahead with that incremental growth that on our two percentage over and above the growth rate of the industry as Vijay shared.
Now the contribution of retail, as Vijay said, it’s a very miniscule. The entire growth has come from our conventional MSME commercial trading, agriculture gold loan business only. So some amount of, like say, additional growth opportunities will be available from the retail portfolio for the next financial year, maybe adding about another one or two percentage in the incremental growth. As he rightly explained, our focus will be more on the, let’s say, secured front. The unsecured front will be very minuscule, particularly the credit card, whatever he said will be very miniscule, particularly to our existing customers and he also explained about our tie-up with the CSK and all. It is more to create a brand awareness, which will be helping us to like say go-forward in like say with the co-branded credit card per se.
The — on — as he said, on retail front, we have — we have been incurring cost, the return is yet to come. When the return actually comes into, our cost-to-income also will start moderating for the next year. The — there is a very good improvement in the asset quality, which we could see, particularly both in terms of the and also the slippage is getting into control. As we — as we expected at the year beginning, we should be closing year, like say, below the promised number of about INR800 crore. As you all know, in the last two, three years, it reduced from INR1,200 Crore to INR1,000 crore to INR1,000 crore to, like say, INR800 crores sort of. Next year it should be moderating further. Slippages, the recoveries are also improving where the recoveries are more than the, like say, slippages. So incremental credit provisioning, whatever we are making is more to increase the provision coverage ratio and decrease the net NPA. So we — initially we shared that we should be getting to one-to-one and a quarter percentage in net NPA. We are also on-track on that front. Be it the growth, similarly, you might have clearly seen the operating profit, net interest margin, net interest income on every parameter, there is like say let’s say, stable and steady growth, whatever we had been let’s say like say declaring in the, like say earlier quarter pre like say December 2022 or whatever. So we hope to maintain the same trend. In fact, if you had a chance to look into last 50 to 60 quarters for about over 90 percentage of the quarters, our margin had been in the range of about 3.4% to 3.7%. Few quarters, it was above 4 percentage in one or two quarters, it was below 3.4%. But as higher than the earlier quarters, we should be able to maintain the stable net interest margin that 3.5 — 3.6 percentage plus or minus 10 basis-points as rightly pointed out by Vijay. When we enter into the decreasing interest-rate scenario, there will be moderation in the yield, but it will take a few quarters to catch-up for the cost of deposits front. Though there could be some quarterly operations, year as a whole, we should be able to maintain at the same level in terms of margins also. So overall, the 3rd-quarter has almost got us back to, like say the period when we used to offer a stable results in the past that almost — closer to the best two quarters, whatever we had declared in the past, the Q3 numbers have come and Q4 is also promising in the same way. We are not in a hurry. Fortunately, we did not go faster in unsecured retail and all, which has helped us to like ensure that our asset quality is intact and also it is improving, both in terms of gross and net NPA numbers, the numbers are decreasing, the recoveries are more than the slippages. And the SMA numbers are also like say, coming down in a stable fashion. Overall, across all parameters, the whatever performance that has happened in the Q3 had been very stable and encouraging. We hope to see the same thing for the 4th-quarter based on whatever we see, the next year things should be even better with this overall background, the — another thing is that you might have clearly seen the operating profit growth also showing better. So the — like say, the incremental provisioning as we enter into percentage like say your overall net NPA, the incremental provisioning like say, requirement may also come down once we have crossed less than 1 percentage in net NPA and the coverage ratio also above 60 percentage or whatever. You might have in fact seen the operating profit level growth for Q3 to Q3 is almost 20 percentage, which is also very encouraging. So across almost all parameters, things have been pretty stable and the growth and other momentum are back and things are on-track. And I’m like we have to like say do some work-in the liability side to ensure that our credit growth will not get hampered because of non-availability of deposits and all. But as you have already seen, those numbers are also almost converging. The CD ratio, we should be able to maintain at about 85 percentage and the LCR calculations are also around 119 at that level. So overall, things are encouraging and like I said, things are back on-track in almost every parameter. I hope going-forward, things should get a better and better. And with this positive tone, I want to conclude this con-call. As I said in the past, the names of our contact persons are already given in the — what do you call your investor presentation. You can get-in touch with those, like say, our CFO, Mr, or Mr or Mr or anybody for that matter. If at all you have any specific questions to answer. Thanks for your patience and supporting us. Us and this as Q3 had been like say a satisfactory quarter for us across all multiple parameters and we hope this trend will continue for the near-future. As of now, on asset quality front, things are looking like say extremely good. The SMA numbers are also decreasing. The next year, the slippage looks — it is going to be lower than whatever we have seen in the current year. And hopefully the — like say, if the reduction in the — like say the reducing interest-rate cycle starts, we think should be even getting better for the economy as a whole and for the growth for the future. Overall, I mean, it’s a satisfactory quarter and I hope that things should get better and better as we move forward. With this closing remarks, I once again thank you all and close this con-call. Our support to Ambique Capital for arranging this con-call and as once again, thank you all. Thank you.
Operator
Thank you. On behalf of Citi Union Bank Limited, that we conclude today’s conference. Thank you for joining us. You may now disconnect your lines.