City Union Bank Q2 net down by 18.5% at Rs 158 crore as provisions spike

City Union Bank on November 2 reported an 18.5 percent decline in its net profit to Rs 157.67 crore in the second quarter ended September of the current fiscal year due to rise in provisioning. The private sector lender had posted net profit of Rs 193.53 crore in the similar quarter a year ago.

Operating profit was higher at Rs 384.66 crore as against Rs 346.48 crore. Total income during the July-September period of 2020-21 fell marginally to Rs 1,230.28 crore as against Rs 1,231.80 crore in same quarter of 2019-20, City Union Bank said in a regulatory filing.

There was marginal rise in bank's gross non-performing assets at 3.44 percent (Rs 1,220.58 crore) of the gross advances at the end of September 2020 from 3.41 percent (Rs 1,135.44 crore) by the end of September 2019. However, net NPAs –as a percentage of net advances– improved to 1.81 percent (Rs 631.44 crore) from 1.90 percent (Rs 624.08 crore).

The bank's provisions for bad loans and contingencies were raised to Rs 177 crore for the reported quarter from Rs 107.95 crore in the year-ago quarter. "During the quarter, the bank has made an additional provision of Rs 115 crore including an interest reversal of Rs 25 crore to meet any future contingency arising out of COVID pandemic and the total provision held by the bank as on September 30, 2020 is Rs 330 crore which is over and above the RBI requirement," the lender said in the filing.

Further, citing the RBI circular and Finance Ministry directive in late October, the lender said it is processing the scheme for grant of ex-gratia payments for borrowers for the period from 1st March till 31st August 2020 for eligible accounts. "As per the circular, the payments have to be credited to the borrowers accounts on or before 5th November and claim for reimbursement is to be made on or before 15th December 2020. The bank is in the process of doing the needful," City Union Bank said.

The directive relates to grant of ex-gratia payment of difference between compound interest and simple interest for six months to borrowers in specified loan accounts between March 1, 2020 to August 31, 2020. "In absence of any direction from Reserve Bank of India or any other authority, interest in interest (compound interest) during moratorium period is continued to be recognised as income on the basis of Income Recognition norms of RBI. However the matter is sub-judice," it added.

Additionally, in a matter related of 2017-18 related to certain improper transactions through Visa, Mastercard and NCPI networks through ATM switch which were approved out the bank's network, City Union Bank had a cyber insurance cover of Rs 25 crore and lodged an insurance claim. "The bank had fully provided for the same. The insurance company on October 20, 2020 had signed settlement agreement and discharge with the bank for an amount of Rs 15 crore. The bank is in receipt of the amount in line with the agreement," it said.

Provision coverage ratio stood at 70 percent as on September 30, 2020, the bank said. Total assets of the bank grew by 4.8 percent to Rs 50,583.18 crore by the end of September 2020.