Karnataka Bank conducted a conference call on 24 May 2024 to discuss its financial results for the quarter ended March 2024. Srikrishnan Harihara Sarma, MD and CEO of the bank addressed the call:

Highlights:

The bank had a good financial year with growth across parameters. The bank completed capital raise through preferential allotment of Rs900 crore and QIP of Rs 600 crore in FY2024. The bank has also exercised call option on Tier II bonds amounting to Rs 720 crore with coupon rate of 12%.

The bank has posted record high net profit of Rs 1306 crore in FY2024, despite one off actuarial provisions Rs 152 crore and Rs 11 crore for centenary year celebrations.

The advances have increased by 19%, while the deposits have moved up 12%. The credit deposit ratio has increased to 75%.

The bank has witnessed a decline in the fresh slippage ratio to 2.8% in FY2024 from 3.31% last year.

The net interest margin of the bank was within the guided range at 3.51% and the loan yield was steady at 9.9%.

The cost of funds increased to 5.22% from 4.74% last year.

More than 90% of the deposits of the banks are less than 2 crore.

Credit cost has declined 0.84% from 1.48% last year.

The bank has witnessed an increase in cost to Income ratio to 53% due to investment in technology, infrastructure and employees addition. 

The bank expects to reduce the cost to Income ratio to around 50% by Q4FY2025.

The RoE of the bank was impacted due to capital raise, while the return on asset ratio is maintained at 1.22% in FY2024.

The capital adequacy ratio stood at 18% with the Tier I ratio of 16.17% and Tier II ratio of 1.83% end March 2024.

The bank has two-third of its branches in Karnataka state, while the bank aims to reposition itself with a branch mix of Karnataka and non Karnataka at 50-50 in next two years.

The bank has 75% collateral available on NPA giving good visibility on recoveries.

The bank targets NIM of 3.5-3.7% for FY2025.

Bank continues to remain focused on retail, agriculture and MSME segments for loan growth. 

The retail segment accounted for 46% of the overall loan book, MSME 20% and the balance one-third of the loan book was towards large corporates.

The bank is targeting loan growth of 18 to 20% for FY2025 and expects to raise the loan book to Rs 90000 crore by March 2025. it''s also on track to touch a loan book of Rs 1 lakh crore by March 2026. 

About 90% of the loan book of the bank is collateralised and the bank has approved the policy for the unsecured lending. so it would be launching new retail loan products including unsecured loans going forward.

The bank expects credit cost of 0.8-1.0% in FY2025.