City Union Bank Investor Presentation Final

Investor Presentation – August 2010 Disclaimer No representation or warranty, express or implied is made as to, and no reliance should be placed on the fairness, accuracy, completeness or correctness of such information or opinions contained herein The information contained in this presentation is only current as of its date Certain statements made in this presentation may not be based on historical information or facts and may be “forward looking statements”, including those relating to the bank’s general business plan’s and strategy, its future financial condition and growth prospects and future developments in the industry and regulatory environment Actual results may differ materially from these forward-looking statements due to a number of factors, including future changes or developments in the bank’s business, its competitive environment and political, economic, legal and social conditions in India This communication is for general information purpose only, without regard to specific objectives, financial situations and needs of any particular person This presentation does not constitute an offer or invitation to purchase or subscribe for any shares in the bank and neither any part of it shall form the basis of or be relied upon in connection with any contract or commitment whatsoever The bank may alter, modify or otherwise change in any manner the content of this presentation, without obligation to notify any person of such revisions or changes This presentation should not be copied and/or disseminated in any manner Table of contents City Union Bank – Overview & Growth Story 4-11 Ownership Pattern 12-14 Management 15-18 Financial Performance 19-32 Strategy 36-37 Recognitions 38-40 City Union Bank – Overview & Growth Story Showcasing steady performance on an ongoing basis … Long and consistent track record of profitability – Profit and dividend payout in all 100 + years of operations Steady growth – Business growing at a CAGR of 27% and Net Profit at a CAGR of 30% in last five years RoA and RoE at 1.5% and 20.5% respectively, which is considered healthy in the banking space Best Corporate Practices; All Independent & Professional directors; Continuity in Management – only CEOs so for Rapid progress on the technology front with 100% business under CBS and State of the Art Technology platform Significant improvement in asset quality over the years Net NPA – 0.58% and Provision Coverage Ratio > 70% Well capitalized; CAR – Basel II – 13.46% as on March 31, 2010 Future plans for expansion of branch network to 500 Branches in next years Rated as No.1 by Chartered Financial Analyst Magazine CUB is well positioned to capitalize on the huge growth opportunities in the banking sector Key milestones 2003 Obtained licenses to act as a agent for procuring life insurance & general insurance business 1998 2009 Initial Public Offering (IPO); Listing Bank’s shares on the BSE, NSE & MSE Rights issue for equity shares @ : – to reward the existing shareholders 1965 2007 Amalgamation of ‘The City Forward Bank Limited’ and ‘The Union Bank Limited’ with our Bank Preferential allotment for equity shares strengthening bank’s capital adequacy ratio 1904 2002 Entered into agreement with TCS for core banking solution “Quartz” Incorporation of the Bank 1957 Take over of Common Wealth Bank Limited 1945 Scheduled bank since 22.03.1945 Strong presence in the South  A network of 222 branches of which 193 branches are located in South India and 139 in Tamil Nadu alone State wise branches No of Branches Statewise % of Branches % of our Business Tamil Nadu 139 63 73 Andhra Pradesh 29 13 Karnataka 15 Maharashtra 12 Kerala 10 Gujarat Others 11 Total 222 100 100 State Branch Expansion  We have received License from Reserve Bank of India to open 62 more branches in various states within a Year Out of which 40 branches are in Tier I and Tier II centres and 22 More branches planned to open under Tier III to VI centres State wise Branch Expansion planned Tier I & II centres Tier III to VI centres Tamil Nadu 20 22 Andhra Pradesh Karnataka Maharashtra Chattishgarh New Delhi Orissa Punjab Uttar Pradesh State Total 40 22 Providing a wide array of services (1/2) Services & facilities – Domestic banking Implementation of core banking at all the branches enabling customers to operate their accounts from any of the branches 168 own inter connected ATMs nationwide as on August 15, 2010; Access to ATMs through Cashtree, NFS, VISA tie-ups VISA debit card access worldwide RTGS and NEFT available at all branches Internet and mobile banking facility SMS alert facility Utility bill payments – Telephone, electricity, credit card payments etc E-Tax payment facility E- payment of college term fees, mess fee & examination fees for university students Demat services in tie-up with NSDL Providing a wide array of services (2/2) Services & facilities - International banking  Forex services to the importers & exporters  Trade credit facility to importers  Handling overseas direct investments and foreign direct investments  International banking operations / cross border banking through correspondent banking relationships with HSBC Bank, Wachovia Bank, Standard Chartered Bank, Commerce Bank & others  Forex dealing services through forward contracts, etc  Tie up with Doha Bank for arrangement of money transfer  Drawing arrangement from Singapore with Bank of India  Money India Service – Tie up with ICICI Bank for fund transfer  Arrangement with UAE Exchange and Majan exchange for money transfer 10 Cost of deposits & yield on advances Cost of deposits and yield on advances in last 10 years Spread between cost of deposits and yield on advances of our bank maintained in the last 10 years 27 Investments – At a Glance Investments Breakup and Category wise Particulars (Rs in Mn) SLR Q1 FY 11 Q1 FY 10 % of Change 27,634.5 23,774.1 16.2% 6,510.6 4,334.5 50.2% 34,145.1 28,108.6 21.5% 7.1% 7.2% -AFS 3,042.0 7,502.5 -40.6% -HTM 31,003.5 20,606.1 50.46% -HFT 99.6 0.0 34,145.1 28,108.6 M D – AFS 2.31 1.76 M D – HTM 5.88 6.39 M D – HFT 6.03 - M D – Overall 5.48 4.98 Non SLR Total Investments Total Return on Investments Investments Breakup: Total Investments 21.9%  In total Non-SLR securities of Rs.6510.6 Mns, investment in NABARD RIDF constitutes Rs.5782.6 Mns  Modified Duration for entire investment portfolio is 5.48 only 28 Loan book – Major Industry wise exposure Advances to Major Industries as on 30th June 2010 Amount (in INR mn) % to Total Advances Construction (Comm Real Estate) 2,501 3% Textiles 8,346 12% Food Processing 1,368 2% Iron & Steel 3,183 4% Paper & Paper products 1,550 2% Other Metal & Metal Products 1,147 2% Other Industries 2,255 3% Loans Composition 29 Loan book – Major Sector wise Exposure & Regulatory Classification Major Sector wise Advances as on 30th June, 2010 Major Sector MSME Amount ( in INR mn) % to Total Adv 23,918.4 33% Agriculture 7,588.3 11% Large Industries 3,950.8 5% Retail Traders 6,930.7 10% Wholesale Traders 8,138.6 11%  SME and retail trade loans earning higher yields  Diversified credit portfolio reduces credit risk  Lower ticket size backed by adequate collaterals  Unsecured Advances around 3% only Regulatory Classification of Advances as on 30 th June, 2010 Classification Amount ( in INR mn) % to Total Adv Corporates 24,876.8 34% Regulatory Retail 30,707.8 43% 1,902.9 3% 14,609.0 20% NBFC Other Advances Gross Loans Total 72,096.5 30 Loan book products composition Loan Products composition as June 30, 2010 Loan Products Combination Amount ( in INR mn) % to Total Adv Demand loans 17,046.4 23% Term loans 25,701.8 36% Overdraft / Cash credit 28,066.7 39% 1,281.7 2% Bills Purchased / Discounted Gross Loans Total 72,096.6 31  Working capital loans yielding higher interest constitute 60% of advances  Re-pricing possible at short intervals thus reducing interest rate risk  ~80% of our loan book is on floating rate basis which reduces interest rate risk Asset quality is showing continuous improvement NPA – AN ANALYSIS – LAST YEARS Gross NPA & Net NPA - % Gross NPA & Net NPA - Quantum  Asset quality has shown continuous improvement over the years; Gross NPA has come down from 5.9% in March’ 05 to 1.4% in March’ 10  Net NPA levels has come down from 3.4% in March’ 05 to 0.6% in March ’10  NPA levels has come down despite the fact that we continue to focus on SME’s and retail trade loans  We have a well defined and robust credit appraisal policy and risk management system 32 Restructured Accounts Details of Restructured Accounts No of Borrowers Amount ( in INR mn) Restructured in I Phase – FY 2008-09 213 3,187.9 Restructured in II Phase – FY 2009-10 51 1,655.6 264 4,843.5 Total Out of the above, Accounts closed till 31.03.2010 89.0 Accounts turned as NPA 181.3 Amounts repaid till 31.03.2010 885.6 Balance outstanding as at 31.03.2010 3,687.6  The Restructured accounts are performing well and certain accounts got closed well before the due date  Around 18% of amount repaid in restructuring accounts  Around 3.7% of restructured accounts turned NPA  We have not restructured any account during the first quarter of 2010-11  Accounts turned as NPA during the first quarter of 2010-11 was NIL  Balance outstanding on Restructured Accounts as on 30 th June 2010 – Rs.3474.6 Mns 33 Income and Expenses break up Interest income break up March’ 10 ( in INR mn) Particulars March’ 09 ( in INR mn) Interest on Loans 7,558 6,553 15.3% Interest on Investments 1,937 1,424 36.0% 71 67 5.97% 9,566 8,044 18.9% Other Interest Income Total expenses Other income break up Particulars March’ 10 ( in INR mn) Expenses break up March’ 09 ( in INR mn) % Change CEB & Charges 690 598 15% Treasury Income 458 480 - 4.6% Suit Recoveries 260 141 84% 27 18 50% 1435 1237 16.0% Others Total Other Income % Change 34 Particulars Interest expended March’ 10 ( in INR mn) March’ 09 ( in INR mn) % Change 6,785 5,618 20.8% Employee cost 801 650 23.2% Other operating exp 857 746 14.9% 8,443 7,014 20.4% Total expenses Increasing employee efficiency Growth in business per employee Steady rise in profit per employee Our employee efficiency has been going up continuously as reflected by the above parameters 35 Strategy 36 Our four pronged strategy going forward… Deposits Advances  Achieve 30% growth in deposits & increase low cost deposits from 20% at present to 25% over years  Maintaining focus in retail/SME sectors at around 65%  Broad base retail depositors to ensure stability   To improve depositor base from 0.8 mn to 1.25 mn; Focus on cross selling of products  Income Expenses  Continued focus on high yielding retail & SME credits  Improving staff productivity to lower man  Improving fee income by way of exchange & commission on non funded business  Tight vigil on miscellaneous expenditure Continuing the high yielding cash credit component at around 60% of advances Achieve steady growth of 25% power cost  Increase fee income from cross selling of insurance, mutual fund products, Online Share trading money transfers & other technology based services  Maintain cost income ratio at the present level of 40% (lowest in the industry) Our strategy is to focus on all these four aspects of banking business to capitalize on the growth opportunities going ahead 37 Recognitions 38 Ranking by Magazine – “The Chartered Financial Analyst” 39 No.1 in Customer Satisfaction awarded by IBA Indian Banks’ Association awarded City Union Bank as No.1 in Customer Satisfaction Study for IBA 2008 conducted by GALLUP consulting Rank of Banks – Index – Bank within Clusters Clusters + City Union Bank 96 Tamilnad Mercantile Bank 96 Karur Vysya Bank 94 Yes Bank 93 Ratnakar Bank 93 Lakshmi Vilas Bank 93 Indus Ind Bank 91 Nanital Bank 91 HSBC 88 Kotak Mahindra Bank 88 40 Thank You ... Table of contents City Union Bank – Overview & Growth Story 4-11 Ownership Pattern 12-14 Management 15-18 Financial Performance 19-32 Strategy 36-37 Recognitions 38-40 1 City Union Bank – Overview... shareholders 1965 2007 Amalgamation of ‘The City Forward Bank Limited’ and ‘The Union Bank Limited’ with our Bank Preferential allotment for equity shares strengthening bank s capital adequacy ratio 1904... International banking operations / cross border banking through correspondent banking relationships with HSBC Bank, Wachovia Bank, Standard Chartered Bank, Commerce Bank & others  Forex dealing services