Karur Vysya Bank conducted a concall on 23 January 2023 to discuss the financial results for the quarter ended December 2022 and prospects of the bank. B Ramesh Babu, MD&CEO of the bank addressed the call:

Highlights:

The performance of the bank for the third straight quarter on growth, profitability and asset quality has been in-line with the numbers indicated earlier and in some cases the bank has also exceeded the indicated numbers much ahead of timeline shared earlier.

The bank has achieved a ROA of 1.32% in Q3FY2023 compared with 0.93% in the Q3 last year and target of 1.25% for the exit quarter of FY2023.

The net interest margin of the bank has increased by 25 bps to 4.3% in Q3FY2023. Going forward, the bank expects the normalized net interest margin to be above 4%.

The bank has recorded recoveries of Rs 85 crore in the technically written off account, higher interest income and containment of expenses has contributed to the strong profitability.

The bank has created provisions for aging of NPAs and improved provision coverage ratio in Q3FY23. The bank has front loaded provisions for tax planning and strengthening the balance sheet.

The credit cost appears slightly at a high level of 1.02% in the 9MFY23. The bank expects the credit cost to be very low from Q1FY2024.

The bank has raised provisions of securities receipt of Rs 491 crore to 100% in line with the RBI guidelines.

The bank has witnessed fresh slippages of Rs 160 to crore in Q3FY2023, while the recoveries and upgradations were higher at Rs 190 crore. For the sixth straight quarter, the bank has continued to contain fresh slippages below recoveries and upgradations.

The GNPA ratio of the bank has declined to 2.66% and the NNPA to 0.89% end December 2022. Going forward, the bank aims to contain a GNPA ratio below 2% and NNPA below 1%.

The SMA 30 DPD+ loan book stands at below 1% and the bank aims to keep it below 1%.

The loan book of the bank has increased 16% on a yoy basis and 3% on a sequential basis.

The yield on loans has increased by 49 bps sequentially to 9.04% in Q3FY23 and the bank expects another 20 bps increase in yield in advance in Q4FY23. More than 80% of the loan book of the bank is on a floating rate and 38% of the loan book is expected to reprice in Q4FY2023.

The deposit book of the bank has increased 18% on a yoy basis and 6% on sequential basis.

The bank aims to increase the CASA deposit ratio to 40% in the years to come.

The cost of deposits has increased by 18 bps to 4.2% in Q3FY23 and the bank expects a 30 bps increase in Q4FY23.

The bank has co-lending ties up with 3 leading NBFCs and it plans on-board one more NBFC in Q4FY23. The bank also has a fintech tie up for microfinance business.

As per the bank, the asset quality issues are an item of the past. The focus is on inclusive growth and recoveries of technically written off accounts. The bank is on a growth path to maximize value for shareholders.

The bank aims to improve RoA to 1.35% by March 2023 and expects to maintain RoA of 1.35% in FY2024.

The liquidity average ratio stands at 200%.

The bank is targeting loan growth of 15% for FY2023

The bank expects to maintain a cost income ratio in the range of 45.47%.

The bank proposes to add 25 branches in FY2024

The bank aims to maintain slippages below recoveries and upgradations going forward with visibility for the near term.