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Analyst Meet / AGM
15-Oct-18
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Conference Call
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Karnataka Bank
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Targets to improve NIMs to above 3% and ROA to 1% by end FY2019
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Karnataka Bank conducted a conference call on 12 October 2018 to discuss the financial results for the quarter September 2018 and prospects of the Bank. Mahabaleshwara MS, MD & CEO of the bank addressed the call:
Highlights:
- The bank has exhibited improved performance on various indicators in Q2FY2019 such as better profit growth, healthy business traction, gaining staff efficiency, reduction in NPAs, decline in stressed assets etc. The bank has also continued to maintain control on expenditure.
- The net interest margin of the bank has moderated slightly to 2.91% in Q2FY2019 from 3.0% in Q1FY2019 and 3.09% in Q2FY2018, while the bank is optimistic about improving margins back to above 3% by end March 2019. The bank has maintained the loan growth guidance of 20% plus for FY2019.
- The fresh slippages ratio rose to 0.80% in Q2FY2019 from 0.59% in Q1FY2019. The fresh slippages stood at Rs 368 crore in Q2FY2019. However, the bank aims to reduce GNPA ratio to 4% (existing 4.66%) and NNPA ratio to 2% (existing 3.0%) by end March 2019.
- The bank has exhibited sharp decline in stressed assets size to Rs 346.7 crore end September 2018 from Rs 734 crore end June 2018 and Rs 1339 crore end September 2017. The bank expects its stressed assets book to continue declining going forward.
- The stressed assets book includes MSME portfolio of Rs 210 crore having RBI dispensation, which has dipped from Rs 319 crore end June 2018.
- The credit cost of the bank has declined to 0.34% in Q2FY2019 from 0.41% in Q1FY2019.
- There was no sale of assets to ARCs, so the securities receipts book was nearly flat a Rs 438.73 crore end September 2018 from Rs 441.23 crore end June 2018.
- The CASA deposits ratio of the bank stood at 27.08% end September 2018, while bank aims to improve it to 29-30% in next two years.
- The bank aims to improve RoA to 1% by end FY2019.
- The provision coverage ratio of the bank stood at 57.49% end September 2018, while banks aims for 60% provision coverage ratio by March 2019.
- The bank has exposure of Rs 156.78 crore amounting to 0.31% of advances to IL&FS groups 3 entities. Of this one exposure of Rs 30.79 crore to ITNL is classified as SMA-2. Further, the exposure to NBFC is Rs 75.59 crore and Energy is Rs 50.45 crore. Also, the bank has exposure of Rs 25 crore in investment book.
- The bank exposure to NBFCs sector at 16% within the internal limit of 18% and entire exposure is standard except IL&FS. The NBFCs exposure are getting re-priced which will benefit the bank.
- The exposure to multiple banking arrangements sands at 23.17% of overall advances and 3.25% is to consortium lending. About 88% of the overall advances are totally secured.
- The bank has 11.13% of the book in housing sector which is growing at 17% and carries yield of 9%.
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