Karur Vysya Bank Ltd (BOM:590003) Q2 2025 Earnings Call Highlights: Strong Growth Amidst Strategic Shifts

Karur Vysya Bank Ltd (BOM:590003) reports robust growth in key metrics, focusing on retail and MSME segments while managing corporate loan challenges.

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Oct 18, 2024
Summary
  • Total Business: INR176,138 crores as of September 30, 2024, with a growth of 4%.
  • Advances: INR80,299 crore, grew by 3%.
  • Deposits: INR95,839 crores, grew by 4%.
  • Net Interest Margin (NIM): 4.11% for the quarter, 4.12% for the half year.
  • Return on Assets (ROA): 1.72% for the quarter.
  • Gross NPA: Reduced to 1.1%.
  • Net NPA: Reduced to 0.28%.
  • Operating Expenses: INR358 crore, increased by 7% sequentially.
  • Cost to Income Ratio: 46.72%.
  • CRAR (Basel III): 16.27%.
  • Liquidity Coverage Ratio: Above the regulatory requirement of 100%.
  • Branch Expansion: Added one branch during the quarter.
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Release Date: October 17, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Karur Vysya Bank Ltd (BOM:590003, Financial) reported a strong quarter with consistent growth in key metrics such as growth, profitability, and asset quality.
  • The bank's total business grew by 4% to INR176,138 crores, with advances and deposits growing by 3% and 4% respectively.
  • The bank achieved a Net Interest Margin (NIM) of 4.11% for the quarter, maintaining above 4% levels despite an increase in the cost of deposits.
  • Gross NPA reduced to 1.1%, and the bank maintained a strong asset quality with a Net NPA of 0.28%.
  • The bank's Return on Assets (ROA) improved to 1.72%, exceeding the guidance of maintaining above 1.65%.

Negative Points

  • The corporate loan book de-grew by 4% due to lower availment in certain sectors and non-conducive pricing.
  • CASA growth was only 1% sequentially, indicating challenges in growing low-cost deposits.
  • Operating expenses increased by 7% sequentially, driven by higher establishment costs and provisions.
  • The bank's liquidity coverage ratio (LCR) decreased to 128%, which may impact growth and margins.
  • Fee income growth remained stagnant despite an increase in the share of retail loans.

Q & A Highlights

Q: What is the bank's approach to loan growth, particularly in the retail, agri, and MSME sectors, given the degrowth in the corporate book?
A: B. Ramesh Babu, CEO, explained that the bank is focusing on profitable loan growth, particularly in the RAM (Retail, Agri, MSME) segments, while being conservative with corporate loans due to high deposit costs. The bank aims to maintain momentum in RAM segments as they are less interest rate sensitive compared to corporate loans.

Q: Can you provide details on the gold loan portfolio and any differences in growth between agri and retail gold loans?
A: B. Ramesh Babu, CEO, stated that the gold loan portfolio is detailed in their presentation, with a focus on maintaining a balanced growth between agri and non-agri segments. The bank aims to keep gold loans around 30% of the portfolio to avoid concentration risk.

Q: What is the current Liquidity Coverage Ratio (LCR) and how does it impact growth or margins?
A: R. Ramshankar, CFO, mentioned that the LCR is at 128% on average, with recent figures at 135%. The revised methodology is now fully implemented, and the LCR provides sufficient cushion for growth without impacting margins significantly.

Q: How is the bank managing the risk profile of its corporate banking book, particularly with fluctuations in ratings?
A: B. Ramesh Babu, CEO, explained that the bank has tactically shifted to include some BB-rated accounts to improve yields while managing risk. The bank's internal monitoring and credit analysis have been strengthened to handle this shift.

Q: What are the efforts to improve fee income, especially with the increase in retail loans?
A: B. Ramesh Babu, CEO, highlighted that the bank is focusing on non-fund based business and third-party income to boost fee income. The shift from corporate to retail loans has impacted processing charges, but overall fee income has increased.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.