Karnataka Bank conducted a conference call on 02 November 2023 to discuss its financial results for the quarter ended September 2023. Srikrishnan Harihara Sarma, MD and CEO of the bank addressed the call:

Highlights:

The bank has recorded record high net profit of Rs 700 crore in H1FY2024 compared with Rs 525 crore in H1FY2023.

The bottomline growth of the bank for Q2FY2024 was impacted due to benefit of Rs 156 crore provisision reveerals on MMTC account in Q2FY2023. Excluding this one off item in Q2FY2023, the net profit is showing growth of 30% for Q2FY2024.

Also, on sequential basis, the Q1FY2024 has benefit of Rs 39 crore on account of locker rent which is absent in Q2FY2024. The treasury income was also lower by Rs 59 crore in Q2FY2024 compared with Q1FY2024.

The bank has recorded 18.5% annualized growth in the advances to touch Rs 66935 crore end September 2023.  The deposits have increased 10% to Rs 89531 crore end September 2023.

The bank is targeting 17-20% loan growth for FY2024. The bank aims to raise the loan book to Rs 72000 crore by March 2024.

The business volumes of the bank have crossed Rs 1.15 lakh crore end September 2023. The bank is witnessing sharp increase in CD ratio rising from 70 to 73% end September 2023.

The bank has completed capital raising of Rs 800 crore to 5 institutions in October 2023. With the capital raise and current liquidity position, the bank is well positioned for strong credit growth ahead.

The bank has exhibited healthy improvement in the asset quality with the decline in the slippage ratio 0.5%. The provision coverage ratio has been also maintained healthy at 83% end September 2023.

The NII growth has been moderate at 2% due to surge in the loan book on sequential basis.

The focus of the bank is on retail, MSME and rural segment for the loan growth.

The cost to Income ratio has increased above 50% due to certain investment, while the bank expects cost to income ratio to moderate to target level of 47-50% in the next couple of quarters.

The bank has received RBI approval for exercising call option on Tire 2 bonds amounting to Rs 400 crore given healthy capital adequacy position. There also intends to exercise call option for second tranche of Tier 2 bonds of Rs 320 crore in February 2024. The bonds carry higher interest coupon of 12%.

The bank has approval for equity capital raising of Rs 1500 crore, of which preferential allotment has been done for Rs 800 crore. The bank expect to complete the second tranche of capital raising of balance Rs 700 crore by the end of the current financial year.

The bank has substantially reduced restructured loan book to Rs 1851 crore end September 2023 from Rs 2050 crore end June 2023

The bank has two co-lending partner and it is also planning to add 2 digital distributor partnerships.

The bank has started door step gold loan offering in Q2FY2024 in BC partnership.

Te bank aims to maintain the net interest margin in the range of 3.5-3.7%, which would support net interest income growth in H2FY2024.

About 95% of the retail loan book of the bank has a collateral coverage.

About 75% of the fixed deposit of the bank have repriced and most of the balance deposits would reprice in Q3 itself.

The CASA deposit ratio is maintained at over 32% and the bank has observed lesser shifting of a CASA deposits to term deposit that the other banks have witnessed.