Karur Vysya Bank Quarterly Result Update – Q4FY23

Popularly known as KVB, Karur Vysya Bank, was initiated by the two great visionaries, the Late Shri M A Venkatarama Chettiar and the Late Shri Athi Krishna Chettiarhas in the year 1916 to financially assist traders and agriculturists in and around Karur. With strong fundamentals and values, the bank has been providing excellence in banking services for 100+ years and has since spread its wings and operates 796 branches across the country.

Result Highlights

Karur Vysya Bank (KVB) had a positive financial quarter. Net Interest Income and Pre-provision operating profit showed steady growth. Provision decreased, leading to a significant increase in net profit. The bank managed its stressed assets well, resulting in a decline in NPA percentages. Capital Adequacy Ratio improved, allowing room for growth. Gross Deposits and Gross Advances increased, although CASA declined slightly. The bank controlled Gross Slippages effectively. Credit growth was moderate due to growth in SME, Retail, and Commercial sectors, offset by a decrease in the Corporate Loan book. Overall, KVB performed well, despite increased operational expenses.

Valuation and Outlook

Karur Vysya Bank performed well with good profitability and asset quality. The bank has focused on cleaning up its books and leveraging its strong presence in southern India. It showed a strong RoE and RoA in Q4FY23, indicating efficient management and a focus on reducing asset stress. The bank merged its consumer banking departments, bringing in experienced officers to handle various aspects. With working capital loans linked to MCLR, there is room for re-pricing, maintaining a healthy NIM. Barring any unforeseen expenses or decline in asset quality, the bank is expected to perform well in FY24. Overall, the outlook remains positive for the bank.

Key Concall Highlights

1.KVB expects a 40-50bps increase in deposits over the next two quarters of FY24, assuming no change in deposit rates.

2.Most interest rate hikes have been passed on to the loan book, but there may not be an equivalent increase in advances yield.

3.Yield on investments is projected to rise by 25bps in the next two quarters.

4.NIM compression is expected in the next two quarters, with a target of around 4%.

5.Management is optimistic about achieving a 1.5% RoA in FY24, despite lower margins and weak business growth.

6.Gross advances are expected to grow by around 14% in FY24, driven by retail and corporate growth.

7.Total deposits are also expected to grow by around 14%, with a focus on the CASA segment.

8.KVB is aggressively recruiting a sales team to drive deposit growth.

9.The bank aims for a Cost-to-Income Ratio of 45%-50% in FY24.

10.Slippage ratio is estimated to be around 1% of the total loan book in FY24. However, efforts will be made to keep it below 1% through
better underwriting and collection processes.

11.The bank aims to keep Gross NPA below 2% and Net NPA below 1% in FY24.

11.KVB plans to open 35-40 branches and digital banking units in the coming year.

12.The bank’s performance has consistently improved over the past eight quarters.