Karur Vysya Bank conducted a concall on 16 October 2023 to discuss the financial results for the quarter ended September 2023 and prospects of the bank. B Ramesh Babu, MD&CEO of the bank addressed the call:

Highlights:

The bank has continued to demonstrate consistent performance in terms of growth, profitability and asset quality.

The bank has crossed the business milestone of Rs 1.5 lakh crore in Q2FY2024.

The credit growth, margins and delinquency level is in line with the guided level due to various initiatives and efforts taken during the last few quarters.

The corporate and commercial loan book has increased by 6% each in Q2 on sequential basis. The retail and agriculture loan book has increased by 4% each.

The corporate loan growth was driven by higher disbursements which were muted for last few quarters.

Retail segment loan growth is driven by the mortgages segment.

The loan growth was in line with the guided level of 14% and the trend is expected to continue at 14-15% for rest of FY2024.

Out of the 1300 retail acquisition team proposed for addition, the bank has a recruited 367 employees in Q2 and the overall recruitment has touched 1270.

The bank has continued to witness pressure on margins which has declined by 12 bps to 4.07% in Q2. The cost of deposits increased by 20 bps, while the yield on loans moved up by 7 bps in Q2.

The bank expects further increase in its cost of deposits by 20 bps in Q3FY2024.

The yield end on investment has increased by 13 bps in Q2 and the bank expects further increase of 10 bps in Q3.

The bank has raised MCLR rate by 20 bps in Q2 and expect 10 to 15 bps increase in yield on advances in H2. Overall, the bank expects the exit NOM of 3.8% in Q4FY2024.

The bank has continued to maintain the return on asset of above 1.5% at 1.57% in Q2FY2024.

The fresh slippage of loans is under control at less than 1% in Q2FY2024.

The SMA 30 plus loan book continued to be below 1% and it would remain below 1% going forward.

The banks efforts on recovering technically written off accounts is yielding result with recoveries of Rs 86 crore in Q2FY24 and Rs 144 crore in H1FY2024.

The bank has reduced a gross NPA ratio to 1.73% and the bank expect to maintain GNPA ratio below 2%.

The bank expects to maintain credit cost at 75 bps in FY2024.

NNPA ratio has declined to 0.47% and the bank expects to maintain NNPA ratio below 1%.

The restructured loan book of the bank has declined to 1.2% of the loan book, while the bank is holding 25% provisions on the restructured loan book.

The cost to Income ratio was higher at 49.14% on account of higher employee benefit provisions.

On account of the wage revision the bank is expecting the pension benefit provisions of Rs 100 crore, of which bank has created provisions of Rs 33 crore in Q2FY2024 and the balance provisions would be created over next two quarters.

The bank expects its employee cost at Rs 290-300 crore per quarter.

The bank has added 25 new branches in the first half and its planning to add 40 branches in FY2024 most of which would be added by end of December 2023.

The unsecured loan book of the bank will remain in the range of 5-10%.