Highlights:

The interest income of the bank was flat in Q2FY2021, while the interest expenses have declined helping to post 15% growth in the net interest income.

The non-interest income of the bank has been boosted by surge in treasury income to Rs 155 crore from 39 crore last year.

The bank has reduced operating expense by 3%, while bank is observing cost-to-income ratio stabilizing at 45%.

The bank aimed for raising NIM above 3% and NIM has increased to 3.08% in Q2FY2021 and 2.99% in H1FY2021.

The bank has continued focus on strengthening balance and raising provisioning helping to reduce NNPA to 2.21% in Q2FY2021.

The bank has substantially raised PCR from 64.7% end March 2020 to 67.93% end June 2020 and to an all time high of 75.44% end September 2020. The bank targets to improve PCR above 80% by March 2021.

CRAR of the bank stands at 13.08% excluding H1 profits, while CRAR stands at 13.68% including profits. The bank is comfortable with capital position, while RBI has also recently provided some relaxation. Bank will take call on capital raising at appropriate time.

The business volume of the bank has increased 3% to Rs 1.27 lakh crore, driven by 4% growth in deposits and 1% rise in advances.

The bank has continued focus on retail and mid-corporate loans. The retail loan book (up to Rs 5 crore) of the bank has increased 9%, while mid-corporate (Rs 5-100 crore) book moved up 15%. However, the corporate book (above Rs 100 crore) has declined 31%.

The loan growth has been healthy in gold loan segment at 24%, home loans 14%, agri loans 22% etc.

The bank has exhibited good traction in the government guaranteed loan scheme for MSME with disbursement of Rs 1600 crore against sanctions of Rs 1750 crore.

The bank expects loan growth of above 8% growth in retail and 15% growth in mid-corporate loans, while corporate loan book would decline.

The bank has exhibited substantial increase in CASA deposits ratio from 27.41% end September 20219 to 29.17% end September 2020. CASA deposits of the bank have increased 10% end September 2020. The bank aims for CASA ratio of 30% by March 2021.

The bank has exhibited decline in cost of deposits to 5.38% from 6.17% yoy, while interest spreads have improved from 3.52% yoy to 4.02% in Q2FY2021.

The bank is having two proposals for corporate restructuring amounting to Rs 500 crore.

KBL Vikas, transformation process, is going on as per schedule. Loan sanction up to Rs 5 crore is digitalized. About 72-75% of sanctions in home loans and auto loans are digitalized.

The bank is not focusing on topline and business growth for FY2021, but expects good performance on other parameters.

The bank aims for raising the share of digital transactions to 90% by December 2020, while it has already touched 88.63% end September 2020.

The loan book under moratorium has declined sharply from 51% end June 2020 to 11.4% end September 2020, with improving trend continuing the bank expects moratorium book to decline below 1% by end December 2020.

The bank expects restructuring to the extent of 2% in the moratorium book.

The restructured loan book of the bank has increased from Rs 601 crore end June 2020 to Rs 644 crore end September 2020.

NPA addition was limited helping to reduce GNPA and NNPA in Q2FY2021.

The slippages stood at Rs 90 crore in Q2FY2020, which are not classified as NPA due to SC order. As per the bank, even if these accounts are classified as NPA in Q3FY2021, there would not be much impact as the impact is already taken care in Q2FY2021.

The bank expects slippage rate of 0.5-0.6% including from moratorium book in Q3FY2021.

As per the bank, recoveries were better than expected despite covid at Rs 156.03 crore in Q2FY2021 compared with Rs 146 crore in Q2FY2020. The write-offs stood at Rs 171.64 crore in Q1FY2021.

The fee income of the bank was impacted due to weak loan growth and various concessions to customers on transactions during pandemic period.

The bank expects further decline in cost of deposits due to reduction in deposit rate. The yield on advances is expected to ease too, but the bank expects to hold on to spread of 4%.

The bank continues to hold on to covid provision of Rs 97 crore as at end June 2020 continues.