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Small Wonder Indeed!
City Union Bank’s success lies in the ability to cut its coat with the cloth in mind
Photo Credit : Subhabrat Das
Few banks in the world can lay claim to an ancestry that’s over a century old — the Kumbakonom-based (Tamil Nadu) City Union Bank or CUB is among a handful of them. Set up in 1904 as The Kumbakonam Bank, it is the cynosure of many eyes from the league of the older lot of private banks in the country. It has managed to nimbly leap — so far at least — over the hurdles that many of its peers in this space (and outside of it too) face regarding capital, productivity, technology and dud-loans.
Still more amazing is the fact that CUB’s been continuously profitable and has paid a dividend all through these years. As for stability of leadership, well, it’s been helmed by only seven chief executive officers in over a century of its existence. And for the third year in a row, it’s been judged the ‘Best Small-sized Bank’ in the BW Businessworld Best Banks’ Survey 2016-17 in association with PwC. The bank shares this honour with another jewel on our banking turf — RBL; it is a repeat of its performance in the previous edition of the survey when it shared the award with DCB Bank; in the preceding year, RBL stood alone on the podium.
For fiscal 2017, CUB posted an operating profit of Rs 994 crore, up by 19 per cent; net profit stood at Rs 503 crore, up by 13 per cent. Deposits grew 11 per cent to Rs 30,116 crore; advances by 13 per cent to Rs 24,112 crore. Balance sheet size at end-March 2017 was up 11 per cent at Rs 35,271 crore.
What Makes CUB Tick?
If you know where you want to go in life, the world makes way for you; CUB exemplifies it. The bank has not spread itself thin. It has stuck to its core — the aam aadmi in the terrains it vends its services. The bank has made its intention to spread outside the Cauvery delta, but the bulk of its 550 branches (an addition of 25 during the year) is in its home state.
N. Kamakodi, managing director and CEO of CUB, never tires of pointing out that “loans to MSMEs (micro-, medium- and small-enterprises) result in lower NPAs (non-performing assets)”. Or the fact that it has never got into consortia. “We have never felt the need to revisit our approach,” says Kamakodi. While demonetisation and the introduction of the good and services tax (GST) did bring in its share of woes, the point being made here is that it makes sense to cater to the base of the pyramid; other banks also articulate such a view, but for CUB, it is bread and butter. A closer look at its credit deployment profile tells you the bulk of it was to MSMEs (34 per cent), agriculture (15 per cent) and wholesale traders (14 per cent).
You might be inclined to believe that the twin shocks of demonetisation and GST would have adversely affected its book given the profile of its clientele. But net NPAs (non-performing assets) were up only by 18 basis points (bps) at 1.71 per cent with gross NPAs up by 41 bps to 2.83 per cent. Out of the total gross NPAs, iron and steel industry accounted for Rs 162.04 crore; Rs 47.07 crore by textiles. During the year, the Reserve Bank’s inspecting team spotted a divergence of Rs 82.50 crore (standards accounts into NPA) based on subjective reasons.
To sum up, CUB is a small wonder indeed; Kamakodi though might say that given the larger context, it is a big enough wonder!