Karnataka Bank conducted a conference call on 30 May 2023 to discuss its financial results for the quarter ended March 2023. Sekhar Rao, interim MD and CEO of the bank addressed the call:

Highlights:

The focus of the bank is on digitization which is expected to gather accelerated pace going forward.

The bank has recorded 4 digit net profit for the first time at Rs 1180 crore in FY2023.

The first slippage ratio was higher at 3.31% in Q4FY23 compared with 3.11% in Q4 last year on accounts of accelerated recognition of NPAs.

The bank has also accelerated provisions with additional provisions of Rs 249 crore in Q4FY2023 out of overall provisions of Rs 328 crore. This helped the bank to reduce net NPAs in Q4FY23.

The bank has raised the PCR to 81% from 73% last year and aims to further improve PCR to 85% in FY2024.

The bank has a well protected its Casa franchise. The cost of saving deposit is competitive at 2.94%. The bank has witnessed decline in the credit deposit ratio to 69% from 71%.

The bank is expecting significant improvement in the asset quality, while the loan growth is expected to be ahead of the industry growth in FY2024.

The bank aims to become a retail centric bank over next one decade.

The bank aims to improve the underwriting process to reduce the turnaround time. About 85% of the retail loans are processed digitally and the bank aims to further improve the share of digitally processed loans.

The bank has a 3 retail hubs and it is planning to add another two hubs and eventually raise the number of retail hubs to 8.

The bank expects some moderation in the net interest margin from 3.7% in FY2023 to 3.5-3.7% for FY2024, which would be offset by the business growth, efficiency improvement and higher other income.

The return on asset and return on equity would be marginally higher in FY2024 over FY2023.

There is a significant reduction in the restructured loan book and over 90% of the restructured loans are currently repaying.

The restructured loan book also includes the related accounts and thus the actual core restructured loan book is lower.

The slippages from the restructured loan book were at Rs 630 crore in FY2023.

The bank has witnessed Rs 180 crore of MTM losses in FY2023, while the bank expects to reverse some of these losses in FY2024.

The bank expects marginal increase in cost-to-income ratio on account of provisions for wage revision.

The credit cost is expected to be at 0.25-0.3% in FY2024.

The share of floating rate loan books and set 79% under fixed rate loan book stands at 21% end March 2023.

Recoveries in written off accounts stood at Rs 283 crore in FY 2023. The bank is targeting recoveries in written off accounts of Rs 250-275 crore for FY2024.