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Analyst Meet / AGM
15-Jul-19
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Conference Call
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Karnataka Bank
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Targets loans growth of 18%, expects credit cost below 1% in FY2020
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Karnataka Bank conducted a conference call on 15 July 2019 to discuss the financial results for the quarter June 2019 and prospects of the Bank. Mahabaleshwara MS, MD & CEO of the bank addressed the call:
Highlights:
- The bank has posted record high quarterly net profit of Rs 175.42 crore for the quarter ended June 2019.
- The operating profit of the bank declined 5% due to surge in employee expenses on account of provisions for employee pension benefits of Rs 21.63 crore in Q1FY2020 against write-back of Rs 21.42 crore in Q1FY2019.
- The cost-to-income ratio stood at 52.7% in Q1FY2020, while the bank expects to contain cost-to-income ratio at 50-52% for FY2020.
- The bank has maintained gross NPAs stable in absolute terms, but GNPA ratio rose due to base effect. The bank has exited Rs 2500 crore of large ticket low yield advances, causing sequential decline in loan book and rise in GNPA and NNPA ratio.
- The fresh slippages of loans stood at Rs 526 crore, of which one large account slipping to NPA related to exposure of Rs 137 crore to NBFC company of ADAG group. The exposure to the ADAG group is now entirely classified as NPAs. Further, the MSME segment contributed slippages of Rs 119 crore, agriculture Rs 74 crore and one toll collection infrastructure account Rs 38.7 crore in Q1FY2020.
- The bank has also reduced NPAs by Rs 545 crore in Q1FY2020, of which recoveries were Rs 154 crore and balance were write-offs.
- The fresh slippages ratio stood at 0.99% in Q1FY2020, while the slippage ratio excluding exposure to ADAG group stood at 0.73% in Q1FY2020.
- The bank expects to contain slippage ratio below 3% in FY2020 compared with 3.16% in FY2019. The quarterly slippage run rate is likely to be around Rs 300 crore per quarter ahead.
- As per the bank, the exposure of Rs 95 crore to Sintex Industries and Rs 100 crore to DHFL is under watch. The bank does not have exposure of above Rs 100 crore per account in BB and below category book.
- The securities receipt book of the bank has declined to Rs 408.64 crore end June 2019 from Rs 428 crore end June 2018.
- The SMA 2 category loan book of the bank stood at 344 crore end June 2019.
- The balance exposure under MSME dispensation scheme stands at Rs 79 crore, plus another MSME exposure of Rs 30 crore may slip to NPA category.
- The bank expects to reduce GNPA ratio below 4% and NNPA ratio below 3% by March 2020.
- The provisions for NPAs stood at Rs 228.32 crore other provisions at Rs 0.87 crore, while the bank has written back standard asset provisions of Rs 5.49 crore, restructured advance provisions of Rs 1.2 crore, investment provisions of Rs 21.86 crore in Q1FY2020.
- The bank expects to reduce credit cost below 1% in FY2020 from 1.39% in FY2019.
- The bank also expects to touch 1% RoA level in FY2020.
- The bank has maintained stable CASA ratio, while dependence on bulk deposits remains negligible. It has setup dedicated team to boost CASA deposit.
- The share of alternate delivery channels in overall transactions of the bank has as increased to 79.7% end June 2019, almost touching the target of 80% set for FY2020.
- The bank is targeting loan growth of 17% for FY2020 with the focus on retail and MSME segment. The bank has a sufficient capital to grow loan book.
- The provision coverage ratio of the bank stood at 58%, while the bank proposes to improve its provision coverage ratio to 60% by end March 2020.
- The bank proposes to add 24 branches in FY2020 raising the overall branch count to 860 branches by March 2020. The bank would focus on adding smaller size branches.
- The bank expect tax rate at 20-22% for FY2020.
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