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Karnataka Bank recorded 12% increase in the net profit to Rs 196.38 crore in the quarter ended June 2020 (Q1FY2021), driven by surge in treasury profits, improved margins and controlled expenses provisioning. Meanwhile, bank has improved asset quality in Q1FY2021 with the sharp decline in fresh slippages and improved collection performance. The bank has posted robust 93% growth in the operating profit, while utilized higher profits for making accelerated provisions.
Bank has maintained the business growth, while the CASA ratio jumped sharply at end June 2020. On advance front, the share of retail loans further improved 48 at end June 2020 from 45% end June 2019.
Asset quality improves: Bank has improved asset quality in the quarter ended June 2020 with the dip in fresh slippages of advances.
- Fresh slippages of advances eased to Rs 167 crore in Q1FY2021 from Rs 304 crore in the previous quarter.
- Meanwhile, the recoveries, upgradations and write-off stood at Rs 282 crore for the quarter.
- Outstanding standard restructured advances of the bank increased to Rs 509 crore (0.94% of advances) at end June 2020 compared to Rs 414 crore (0.73% of advances) at end March 2020.
- Stressed assets (NNPA and restructured advances) rose to 3.95% of advances at end June 2020 from 3.81% at end March 2020 and declined from 4.02% at end June 2019.
| Asset Quality Indicators: Karnataka Bank |
|
Jun-20 |
Mar-20 |
Dec-19 |
Sep-19 |
Jun-19 |
Variation |
| QoQ |
YoY |
| Gross NPA (Rs Crore) |
2557.64 |
2799.93 |
2777.46 |
2594.27 |
2437.53 |
-9 |
5 |
| Net NPA (Rs Crore) |
1630.65 |
1755.01 |
2058.04 |
1863.11 |
1759.77 |
-7 |
-7 |
| % Gross NPA |
4.64 |
4.82 |
4.99 |
4.78 |
4.55 |
-18 |
9 |
| % Net NPA |
3.01 |
3.08 |
3.75 |
3.48 |
3.33 |
-7 |
-32 |
| % Provision Coverage Ratio |
67.93 |
64.70 |
59.34 |
59.19 |
58.08 |
323 |
985 |
| % CRAR - Basel III |
13.07 |
12.66 |
12.40 |
12.64 |
12.70 |
41 |
37 |
| % CRAR - Basel III - Tier I |
11.07 |
10.66 |
10.40 |
10.64 |
10.70 |
41 |
37 |
| Variation in basis points for figures given in percentages and in % for figures in Rs crore |
Business Performance:
Steady business growth: Business of the bank increased at steady pace of 4% yoy to Rs 126063 crore at end June 2020. Deposits increased 5% to Rs 71854 crore, while advances also moved up 3% to Rs 54209 crore at end June 2020. Credit-deposit ratio eased to 75.4% at end June 2020 from 79.4% at end March 2020.
CASA ratio improves: CASA deposits increased 10% to Rs 20594 crore. CASA ratio improved to 28.7% at end June 2020, compared with 27.4% at end June 2019. Meanwhile, bank has sharply reduced bulk deposits by 93% yoy to mere Rs 19 crore at end June 2020.
Retail loans driving advances growth: Advances rose 3% at Rs 54209 crore at end June 2020. The corporate advance declined 2% to Rs 28248 crore, while the retail advance galloped 9% to Rs 25961 crore at end June 2020.
* Retail advances gained share to 47.9% at end June 2020 from 45.3% at end June 2019.
* Break-up of advances shows housing at 16.9% of the advances, agriculture - 12.1%, SME - 19.5%, medium enterprises - 3.3%, large enterprises - 11.0%, other personal loans - 1.4% and other - 10.5% at end June 2020.
* Priority sector loans (PSL) of the bank stood at 46.3% of advances at end June 2020, while consistently exceeding the regulatory PSL target of 40%, while increased from 43.8% a quarter ago and 43.6% a year ago.
Investment book of the bank increased 7% to Rs 18277 crore at end June 2020. Share of AFS book increased to 20.3% at end June 2020 from 19.4% a quarter ago and declined from 27.5% a year ago. The modified duration of AFS book stood at 3.75 years, while that of overall investment book was at 5.57 years at end June 2020.
Network expansion: Bank has opened 10 branches in the quarter ended June 2020. Bank has the network of 858 branches and 1024 ATMs at end June 2020.
Book value stood at Rs 204.45 per share at end June 2020. Adjusted Book value (excluding NNPA and 10% of restructured assets) was at Rs 150.36 per share at end June 2020.
Quarterly Performance
NII growth steady, NIMs improves: For the quarter ended June 2020, the bank has posted 2% growth in interest income to Rs 1615.71 crore, while interest expenses declined 1% to Rs 1080.59 crore. NII rose at moderated pace of 8% to Rs 535.12 crore, as net interest margin (NIM) improved to 2.89% in Q1FY2021 from 2.81% in Q4FY2019.
Non-interest income spurts: The non-interest income of the bank increased 112% to Rs 518.92 crore in Q1FY2021. The core fee income of the bank declined 12% to Rs 164 crore, while trading income surged 1379% to Rs 355 crore in Q1FY2021 over Q4FY2019. Net Total income jumped 43% to Rs 1054.04 crore in quarter under review.
Expense ratio dips: Operating expenses declined 3% to Rs 377.00 crore. The employee cost moved up 14% to Rs 201.65 crore in Q1FY2021, while the other operating expenses dipped 17% to Rs 175.35 crore. Expense ratio slipped 35.8% in Q1FY2021 compared with 52.7% in Q4FY2019.
The operating profit surged 93% to Rs 677.04 crore in the quarter ended June 2020.
Provision zooms: Bank has witnessed jump in provisions and contingencies to Rs 509.07 crore in Q1FY2021 as against Rs 201.14 crore in the corresponding quarter last year. Thus, the Profit before tax (PBT) jumped 13% to Rs 167.97 crore in Q1FY2021 over Q4FY2019.
Bank has written back tax provisions stood at Rs 28.41 crore in Q1FY2021 against write-back of Rs 26.55 crore in Q4FY2019. Net profit improved 12% to Rs 196.38 crore in Q1FY2021.
Financial Performance FY2020
For the year ended March 2020 (FY2020), the bank has posted 10% decline in net profit to Rs 431.78 crore. The net interest income improved 7% to Rs 2030.36 crore, while non-interest income jumped 39% to Rs 1396.05 crore in FY2020. The expense ratio moved up by 152 bps to 51.6% in FY2020 compared to 50.1% in FY2019. The operating expenses increased 21% to Rs 1769.64 crore, while provision and contingencies moved up 35% to Rs 1134.74 crore. The profit before tax declined 14% to Rs 522.03 crore in FY2020. After considering 17% of effective tax rate, the net profit fell 10% to Rs 431.78 crore in FY2020.
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