Capitaline

Analyst Meet / AGM 27-Jul-18

Conference Call

Karur Vysya Bank

Expects slippages of loans to decline in rest of FY2019

Karur Vysya Bank conducted concall on 26 July 2018 to discuss financial performance for the quarter ended June 2018 and the prospects of the bank. P R Seshadri, MD&CEO of the bank addressed the call:
Highlights:

The transformation process of the bank began to gather steam during the quarter ended June 2018. The number of products available on digital channel of the bank has increased to four products – home loans, loan against property, unsecured personal loans and renewed working capital loans.
The bank is able generate around 300 application on its digital channel per day, while the significant development has been made on introduction of more new products.
The business of the bank has increased 9%, driven by 13% growth in advances which is line with the guidance of loan growth in line with the industry level.
The bank has continued to grow CASA deposits, while CASA deposits ratio has crossed 30% mark end June 2018 and bank aims to further improve CASA ratio to 32% by March 2019.
The corporate loans slippages were Rs 267 crore in Q1FY2019, of which Rs 160 crore were from the watch list. Further, the 12 February 2018 circular of the RBI also contributed slippages of Rs 217 crore.
The bank had guided at watch list of Rs 325 crore end March 2018 from corporate loan book, which consisted of 50% from funded book and rest 50% from non-funded book. In Q1FY2019, this 50% funded watchlist has slipped to NPA category.
Going forward, the bank do not see any stress in its corporate loan book and expects slippages of around Rs 275 crore in the corporate loan in rest of FY2019.
The commercial loan book slippages were elevated at Rs 240 crore in Q1FY2019. However, as per the bank, historically the slippages in the commercial loan book have been higher in Q1 and slippages in the in rest three quarters of the financial year are equal to Q1. Accordingly, the bank expects significant decline in commercial slippages, going forward.
The bank expects annualized gross slippage at 150 bps, while sees credit cost at Rs 500 crore in FY2019.
The securities receipt book of the bank stood at Rs 399 crore end June 2018, on which bank has raise to raise provisions to 50%.
The bank has exhibited sequential decline in net interest margins on account of one-off interest income boosting margins in the previous quarter.
The operating expense growth of the bank was high on account of significant branch expansion, while the bank would go slow on branch expansion ahead. The bank expects overall expenses growth to be lower than revenue growth for FY2019.
The bank has been able to show good growth in fee income. It has turned out to be one of the major bancassuarance partner for one of the insurer. The bank has introduced a product agnostic uncapped incentive structure for its employees. The employee base of the bank stands at 5600 employees end June 2018, of which 5400 employees are eligible for incentive structure.
The bank exposure to NCLT related accounts stands at Rs 914 crore, while bank has made provision of 66.5%. The NCLT 1 exposure is Rs 518 crore with provision of Rs 68% and NCLT 2 is Rs 396 crore with the provisions of Rs 63%. The bank expects two-third of NCLT exposure to recover in FY2019.

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