City Union Bank Q4 FY25 results: Profit rises 13%, asset quality strengthens, institutional sentiment steady

City Union Bank Limited has reported its audited financial results for the fourth quarter and full year ending March 31, 2025, reflecting measured expansion in profits, a stronger asset quality position, and resilient institutional sentiment. The Tamil Nadu-based private sector bank posted a net profit of ₹1,124 crore for FY25, registering an 11% year-on-year growth, as credit growth, better fee income, and a fall in bad loans supported operational performance.

Announced on May 2, 2025, the results reaffirmed the Bank’s positioning as a stable, regionally entrenched mid-sized lender, with renewed focus on digital expansion and SME outreach. Analysts tracking the stock noted that City Union Bank has delivered consistent improvements in return ratios and credit discipline even as competition from larger private banks and fintechs intensifies.

How Did City Union Bank Perform in Q4 FY25?

During the January–March 2025 quarter, City Union Bank’s Profit After Tax (PAT) rose to ₹288 crore, a 13% increase from ₹255 crore in Q4 FY24. The growth came on the back of strong 43% year-on-year growth in non-interest income, which jumped to ₹251 crore, driven primarily by robust loan processing fees and higher insurance commission earnings.

Net Interest Income (NII) rose 10% to ₹601 crore from ₹547 crore a year earlier, reflecting sustained expansion in the Bank’s loan book as well as improved lending rates. Total income for the quarter stood at ₹1,784 crore, marking a 15% annual growth. On the expenditure side, interest expenses rose 13%, and operating expenses increased 11%, leading to an overall 12% rise in total expenses at ₹1,343 crore.

As a result, the Bank’s operating profit surged 25% to ₹441 crore in Q4 FY25 from ₹352 crore in Q4 FY24.

What Does Full-Year FY25 Performance Reveal?

City Union Bank ended FY25 with a 12% rise in total income at ₹6,732 crore, supported by 11% growth in interest income and 21% growth in non-interest income. The Bank’s Net Interest Income for the year rose to ₹2,316 crore, up 9% from ₹2,123 crore in FY24. Total operating profit stood at ₹1,679 crore, representing an 11% increase.

PAT for the full year rose from ₹1,016 crore to ₹1,124 crore, marking a steady 11% growth in bottom-line performance. The Bank’s cost to income ratio was marginally higher at 47.77% compared to 47.06% in FY24, indicating stable operational efficiency amid rising costs.

Return on Assets (ROA) improved marginally to 1.55% for FY25, and Return on Equity (ROE) for Q4 FY25 was at 12.60%, slightly up from 12.39% in the same quarter last year.

What’s Driving Loan and Deposit Growth?

City Union Bank registered 14% growth in both deposits and advances, a reflection of its renewed focus on expanding business volumes post-pandemic. Total deposits reached ₹63,526 crore at the end of FY25, compared to ₹55,657 crore in FY24. Within this, the CASA component stood at ₹18,119 crore, accounting for 29% of total deposits, indicating moderate low-cost funding support.

On the lending front, total advances rose to ₹53,066 crore, up from ₹46,481 crore in the previous year. The average Credit to Deposit Ratio was reported at 84%, signalling efficient fund deployment across segments such as SME lending, agriculture, and retail.

The yield on advances improved slightly to 9.93% in Q4 FY25 from 9.85% a year ago, aided by re-pricing benefits and selective risk-based pricing in micro and SME loans.

How Strong Is City Union Bank’s Asset Quality?

City Union Bank reported continued improvement in asset quality for the seventh consecutive quarter. Gross Non-Performing Assets (GNPA) dropped to 3.09%, down from 3.99% in FY24. Net NPA declined to 1.25% from 1.97% a year ago. In absolute terms, GNPA fell to ₹1,638 crore from ₹1,854 crore, and Net NPA was reduced to ₹653 crore from ₹899 crore.

The Bank’s Provision Coverage Ratio (PCR) was maintained at 78% (including technical write-offs) and 60% (excluding write-offs), indicating healthy provisioning buffers.

Management highlighted that consistent loan recovery efforts, early warning frameworks, and increased collateral-based lending have supported the GNPA trajectory.

Are Profitability Metrics Holding Steady?

Despite moderate margin compression across the sector, Net Interest Margin (NIM) for City Union Bank held stable at 3.60% for FY25. Though this marked a marginal decline from 3.65% last year, it remained within the Bank’s guided range, thanks to balanced growth across high-yield and secured lending portfolios.

The cost of deposits rose to 5.85% in FY25 from 5.59% in FY24, reflecting industry-wide pressure from tighter liquidity and deposit rate competition. However, the Bank also improved its Return on Investments (ROI) to 6.84%, up from 6.49% in the previous fiscal.

What Is the Institutional Sentiment Around City Union Bank?

The immediate market response to the earnings release on May 3, 2025, was neutral, with the City Union Bank stock (NSE: CUB) trading flat in early hours. Analysts noted that the strong earnings were largely anticipated, and no forward guidance or strategic shift was disclosed, resulting in a muted stock reaction.

According to the latest shareholding patterns, Foreign Institutional Investors (FIIs) held approximately 21.5% of the Bank’s equity as of March 2025, slightly down from 22.1% in the previous quarter. This indicates mild FII profit-booking or portfolio rebalancing. On the other hand, Domestic Institutional Investors (DIIs) increased their stake to around 12.3%, up from the prior quarter, suggesting a vote of confidence in the Bank’s fundamentals by Indian mutual funds and insurance firms.

Trading volumes have remained in line with monthly averages, with no significant block deals or insider buying patterns observed.

Is the Stock a Buy, Sell, or Hold Post Earnings?

Technical indicators suggest that the stock is currently hovering near its 200-day moving average, which has acted as a key resistance level in recent weeks. The Relative Strength Index (RSI) is at a neutral 49, implying limited short-term momentum.

Brokerages tracking mid-cap banking stocks have maintained a ‘Hold’ to ‘Accumulate’ recommendation on City Union Bank, citing its strong capital adequacy of 23.75%, improving GNPA/NNPA profile, and stable NIMs as investment positives. However, analysts also called for faster CASA mobilisation and loan book diversification beyond traditional SME/agri focus areas.

At a Price-to-Book (P/B) ratio of ~1.1x, the stock appears undervalued compared to peers like Federal Bank and Karur Vysya Bank, offering moderate upside potential if key financial metrics continue improving in FY26.

What’s the Outlook for FY26?

Looking ahead, the management is expected to prioritise digital transformation, with an aim to expand net banking and mobile app penetration across its 875-branch network. Growth in digital sourcing of CASA, better fee income through bancassurance, and expansion into tier-2 and tier-3 markets will remain top focus areas.

With a robust Tier-1 capital ratio of 22.70%, the Bank is well-capitalised to absorb asset-side shocks and potentially pursue measured inorganic growth if strategic opportunities arise. Sector-wide dynamics such as RBI‘s interest rate decisions, inflation trajectory, and deposit competition will likely shape the Bank’s operating margins in the near term.

From an investor standpoint, City Union Bank offers a low-beta financial play with consistent return metrics, making it a potential candidate for long-term hold positions in diversified banking portfolios.