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Analyst Meet / AGM
17-Jan-20
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Conference Call
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Karnataka Bank
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Targets 14-15% credit growth, NNPA 3%, NIM 3%, RoA 0.9%, ROE 12% in FY21
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Karnataka Bank conducted a conference call on 17 January 2020 to discuss the financial results for the quarter December 2019 and prospects of the Bank. Mahabaleshwara MS, MD & CEO of the bank addressed the call:
Highlights:
- The bank has posted healthy 25.33% growth in the operating profit in Q3FY20, driven by decent interest income growth of 8%, trading profit spurt of 69%, fee income growth at 14% in Q3FY2020. The opex was well controlled, driven by improved operating efficiencies.
- The accelerated NPA recognition has led to increase in fresh slippages of loans to Rs 637.54 crore in Q3FY2020. The bank has classified 4 accounts in NBFC sector of Rs 247.36 crore as NPAs, while MSME segment contributed fresh slippages of Rs 58.23 crore, agriculture Rs 80.58 crore, hospitality Rs 18.16 crore, residential builder Rs 18 crore etc.
- The fresh slippage ratio increased to 1.23% in Q3FY2020.
- NBFC exposure of the bank has declined to 14.06% end December 2019. The existing NBFC book does not have any stress. The NBFC book also includes some government backed NBFC. Among the NBFC accounts, there are 20-21 accounts having exposure of Rs 100 crore and above.
- The bank has recorded NPA reductions of Rs 454 crore in Q3FY2020.
- The credit cost of the bank stood at 0.55% in Q3FY2020 and 1.50% in 9MFY2020, compared with 1.39% in FY2019.
- The bank has improved PCR to 59.34% end December 2019, while expects it to be above 60% by March 2020.
- As per the bank, there no more migrations related provisions required in Q4FY2020.
- The exposure to account under IBC stands at Rs 1284.91 crore and bank is holding provisions of Rs 1049.12 crore against these accounts.
- As per the bank, one account of Rs 68.76 crore under IBC is expected to be resolved by March 2020 without any hair cut required, while the account is fully provided.
- The bank expects slippage to be lower in Q4FY2020 and GNPA and NNPA to decline in Q4FY20. Bank aims to reduce to NNPA 3% in next 1-2 year.
- The SMA 2 category loan book of the bank has declined from Rs 588.37 crore end September 2019 to Rs 479.3 crore end December 2019.
- The number of accounts with exposure of Rs 100 crore and above is 246 accounts, while between Rs 5-100 crore is 4090 accounts.
- The securities receipt book of the bank has eased to Rs 390.52 crore end December 2019 from Rs 434.99 crore end December 2018. Bank is holding provisions of 21.38% against securities receipt book.
- The bank has improved CASA deposits ratio to 27.39%, as casa deposit increased 12.6% end December 2019.
- The yield on advances was steady at 9.45%, while cost of deposits declined to 6.02%. The bank expects cost of deposits to moderate ahead with the reduction in deposits rate and strong growth in CASA deposits.
- The standard restructured advance book of the bank has declined to Rs 503.74 crore end December 2019 from Rs 901 crore end December 2018.
- The number of externally rate advances has increased to 328 accounts end December 2019 from 290 accounts end December 2018. However, the exposure to these accounts declined to Rs 17413 crore yoy from Rs 19137 crore. Of this, NPA is Rs 922 crore and SMA 2 category loan book is 83 crore end December 2019.
- The bank has posted 12.6% growth in retail (below Rs 5 crore) and 10.5% growth in mid-corporate loan book (Rs 5-100 crore). The corporate loan book (Rs 100 crore above) has declined 9% mainly driven by decline in NBFC exposure and selective in taking new exposure.
- The bank expects to sustain retail and mid-corporate loan growth and record double digit loan growth for FY2020.
- The bank has exhibited decline in share of corporate loans to 25.73% end December 2019 (from 29.73% yoy, while the share of mid-corporate loans increased to 27.46% (26.7%) and retail to 46.3% (43.5%).
- Bank aims to raise share of retail loans to 50% and mid-corporate loans to 30%, while reduce corporate loans to 20% by March 2021.
- The bank has started digital loan sanctioning for home, auto and personal loan which facilitate loan sanctioning in 5-20 minutes, while the same is to be extended to MSME.
- The bank has appointed sales executives for all 14 regional offices, which are supported by dedicated sales team.
- Bank aims to improve NIM to 2.8-2.9% by March 2020 and 3% by March 2021.
- Bank will take decision on switching to new tax rate at appropriate time, consultation process on.
- The bank has is targeting 14-15% credit growth, NNPA 3%, NIM 3%, RoA 0.9%, ROE 12% in FY21.
- The bank has network of 845 branches and employee base stands at 8240 employees end December 2019.
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