Karnataka
Bank conducted a conference call on 23 January 2024 to discuss its financial
results for the quarter ended December 2023. Srikrishnan Harihara Sarma, MD and
CEO of the bank addressed the call:
Highlights:
The quarter ended December 2023
was very interesting as the bank has achieved so many things on the
transformation agenda front. The focus is on process, product, people,
technology and whole business. The bank has focused on new product launches and
lateral hiring to strengthen the management.
The gross advances of the
bank grew by Rs 10000 crore in 9MFY2024 to Rs 69740 crore end December 2023. The
bank aims to touch the loan book of Rs 1 lakh crore by FY2026.
Deposits increased 9% yoy to
Rs 92195 crore end December 2023. The CASA deposits grew by 8% yoy end December
2023.
The bank has continued to
maintain Casa deposit ratio in the range of 31 to 32%.
The net interest income
margin (NIM) stood at 3.46% which is within the guided range of 3.4-3.7%. The
margins of the bank have been impacted mainly due to repricing of deposits.
The RoA of the bank was 1.21%
which is in the targeted range of 1.2-1.4%.
The RoE at 14.28% for
9MFY2024 is within the targeted range of 14 to 17%.
The bank has raised provisions
for wage revision from 15% to 17% with the additional incremental provisions of
Rs 25 crore in Q3FY2024 for a period of November 2022 to December 2023.
With the improved growth in
the income, the bank expects to reduce the cost to Income ratio to below 50% in
next couple of quarters from existing 53% level.
The fresh slippage ratio for
the bank was elevated at 0.8% on account of the slippages from the restructured
loan book. The bank is monitoring the restructured loan book and the stress is
expected to be recognized in next two-three quarters.
Within the restructured loan
book of Rs 2000 crore, the bank expect the stress level at 30-35% or Rs 600 to
900 crore.
The fresh slippages of loans
stood at Rs 516 crore, while the recoveries and upgradations were at Rs 173
crore and write offs at Rs 130 crore.
The SME segment accounted
for 70-75% of the fresh slippages.
The restructured loan book
of the bank is 95% collateralized, with the retail and the corporate mix stand
at 50:50.
The provision coverage ratio
(PCR) including write off stands at 81% and bank would maintain provision
coverage ratio at existing level. PCR excluding write off was at 58% and the
bank aims to raise it to 70% in next 18 months.
The bank aims to reduce
gross NPA ratio to 3% in the next 6 months, supported by strong recoveries and
accelerated provisioning.
The bank is repaid Tier II
capital of Rs 400 crore carrying high coupon rate of 12% in November 2024 and
the bank is looking at repayment of another Rs 320 crore of high coupon Tier II capital in
February 2024.
Repayment of Tier II bonds
is expected to support 8-9 bps improvement in the margins.
The bank does not have any exposure
to AIF so there is no requirement of the provisioning.
The capital adequacy
ratio of the bank is healthy even excluding the 9 months profit. However, the
bank is going for capital raising for the repayment of the high cost borrowing.
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