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Karnataka Bank recorded 25% decline in the net profit to Rs 93.38 crore in the quarter ended September 2017 (Q2FY2018). The profitability of the bank was impacted due to surge in provisions. The bottomlines were also impacted due to higher tax provisions in Q2FY2018 against write-back of tax provisions in Q2FY2017. However, the bank has substantially improved margins and non-interest income. The business growth of the bank was steady, while the bank has improved its credit-deposit ratio to 72.7% end June 2017. The bank has also improved asset quality in Q2FY2018, while showing reduction in fresh slippages of loans. Bank has maintained the CASA ratio flat at 28.6% end September 2017.
Asset quality improves: Bank has improved asset quality in the quarter ended September 2017 with the reduction in fresh slippages of advances.
- Fresh slippages of advances eased to Rs 374 crore in Q2FY2018 from Rs 498 crore in the previous quarter. Meanwhile, the recoveries, upgradations and write-off stood at Rs 349 crore for the quarter.
- Outstanding standard restructured advances of the bank eased to Rs 910 crore (2.21% of advances) at end September 2017 compared to Rs 968 crore (2.52% of advances) at end June 2017.
- Stressed assets (NNPA and restructured advances) declined to 5.24% of advances at end September 2017 from 5.71% at end June 2017 and 6.61% at end September 2016.
- RWA increased 12% to Rs 42019.00 crore at end of September 2017 from a year earlier.
| Asset Quality Indicators: Karnataka Bank |
|
1709 |
1706 |
1703 |
1612 |
1609 |
Variation |
| QoQ |
YTD |
YoY |
| Gross NPA (Rs Crore) |
1715.70 |
1690.87 |
1581.59 |
1560.23 |
1344.50 |
1 |
8 |
28 |
| Net NPA (Rs Crore) |
1246.81 |
1229.84 |
974.73 |
1065.66 |
961.36 |
1 |
28 |
30 |
| % Gross NPA |
4.13 |
4.34 |
4.21 |
4.30 |
3.64 |
-21 |
-8 |
49 |
| % Net NPA |
3.04 |
3.20 |
2.64 |
2.99 |
2.63 |
-16 |
40 |
41 |
| % CRAR - Basel III |
12.46 |
13.02 |
13.30 |
13.19 |
11.19 |
-56 |
-84 |
127 |
| % CRAR - Basel III - Tier I |
11.44 |
11.94 |
12.21 |
11.86 |
9.84 |
-50 |
-77 |
160 |
| 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 nearly steady pace of 9% yoy to Rs 97685 crore at end September 2017. Deposits increased 7% to Rs 56558 crore, while advances moved up 12% to Rs 41127 crore at end September 2017. Credit-deposit ratio improved to 72.7% at end September 2017 from 68.4% at end June 2017.
Stable CASA ratio: CASA deposits increased 16% to Rs 16163 crore. CASA ratio was stable on sequential basis at 28.6% at end September 2017 compared with 28.9% at end June 2017, while improved from 26.3% at end September 2016. The bulk deposits with the bank stood at mere Rs 201 crore at end September 2017.
Retail loans share declines: Advances increased 12% at Rs 41127.00 crore at end September 2017. The corporate advance moved up 17% to Rs 20481 crore, while the retail advance rose 8% to Rs 20646 crore at end September 2017.
- Retail advances share declined to 50.2% at end September 2017 from 52.3% at end September 2016.
- Break-up of advances shows housing at 12.9% of the advances, agriculture - 13.2%, SME - 21.8%, medium enterprises - 3.1%, large enterprises - 11.4%, other personal loans - 6.1% and other - 31.6% at end September 2017.
- Priority sector loans (PSL) of the bank stood at 45.2% of advances at end September 2017, while consistently exceeding the regulatory PSL target of 40%. The share of PSL has declined from 46.8% at end June 2017 and 48.8% at end September 2016.
Investment book of the bank was flat at Rs 16734 crore end September 2017 over September 2016. SLR investment stood at Rs 13493 crore. Share of AFS book dipped to 32.8% at end September 2017 from 41.9% a quarter ago and 34.4% a year ago.
The modified duration of AFS book declined to 2.07 years, while that of overall investment book was nearly flat at 4.50 years at end September 2017.
Network expansion: Bank has opened 4 branches in the quarter ended September 2017. Bank has the network of 773 branches and 1397 ATMs at end September 2017.
Book value stood at Rs 172.14 per share at end September 2017. Adjusted Book value (excluding NNPA and 10% of restructured assets) was at Rs 124.82 per share at end September 2017.
Quarterly Performance
Healthy NII growth with improved NIMs: For the quarter ended September 2017, the bank has posted 1% growth in interest income to Rs 1317.93 crore while interest expenses declined 3% to Rs 877.69 crore. NII moved up 11% to Rs 440.24 crore, as net interest margin (NIM) rose to 3.03% in H1FY2018 from 2.92% in H1FY2017.
Non-interest income growth improves: The non-interest income of the bank increased 31% to Rs 247.82 crore in Q2FY2018. The core fee income of the bank increased 36% to Rs 162 crore, while trading income surged 21% to Rs 86 crore in Q2FY2018 over Q2FY2017. Net Total income rose 17% to Rs 688.06 crore in quarter under review.
Expense ratio dips: Operating expenses declined 9% to Rs 321.82 crore. The employee cost fell 28% to Rs 124.17 crore in Q2FY2018, while the other operating expenses rose 9% to Rs 197.65 crore. Expense ratio was declined to 46.8% in Q2FY2018 compared with 60.3% in Q2FY2017.
The operating profit surged 57% to Rs 366.24 crore in the quarter ended September 2017.
Provision jumps: Bank has witnessed decline in provisions and contingencies to Rs 225.98 crore in Q2FY2018 as against Rs 130.55 crore in the corresponding quarter last year.
The profit before tax (PBT) increased 37% to Rs 140.26 crore in Q2FY2018 over Q2FY2017.
Tax provision rebounds: Banks tax provisions stood at Rs 46.88 crore in Q2FY2018 against write-back of Rs 21.62 crore in Q2FY2017. Net profit declined 25% to Rs 93.38 crore in Q2FY2018.
Half Yearly Financial Performance:
For the half year ended September 2017 (H1FY2018), the bank has posted 7% decline in net profit to Rs 227.23 crore. The net interest income improved 13% to Rs 864.66 crore, while non-interest income moved up 28% to Rs 465.21 crore in H1FY2018. The expense ratio dipped by 690 bps to 49.2% in H1FY2018 compared to 56.1% in H1FY2017. The operating expenses increased 37% to Rs 675.94 crore, while provision and contingencies moved up 59% to Rs 424.86 crore. The profit before tax increased 10% to Rs 251.08 crore in H1FY2018. After considering 9% of effective tax rate, the net profit fell 7% to Rs 227.23 crore in H1FY2018.
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