Karur Vysya Bank conducted a concall on 13 May 2024 to discuss the financial results for the quarter ended March 2024 and prospects of the bank. B Ramesh Babu, MD&CEO of the bank addressed the call:

Highlights:

The performance of the bank is inline with the guidance. The bank has exhibited strong performance on three fronts – growth, profitability and asset quality.

The balance sheet of the bank has crossed the milestone of Rs 1 lakh crore end March 2024.

The business volumes of the bank have touched Rs 1.54 lakh crore end March 2024. The advances have increased 16% to Rs 74426 crore, while deposits have increased 16% to Rs 89113 crore end March 2024.

The term deposits of the bank have increased by 21% driven by various initiatives undertaken. Casa acquisition is progressing well, while the other investment opportunities have impacted the Casa growth.

The advances growth at 16% was highest in last 11 years.

Growth was little impacted in Q4FY24 on account of focus on reducing the low yield advances.

The commercial loan book of the bank has witnessed increase in share to 31%, while the share of retail loan book stood at 24%, agriculture 23% and the corporate has reduced to 19%.

The long growth of the commercial book has accelerated to 21% from 12% last year.

The retail loan growth has also improved to 18% from 16% last year

KVB smart the branch less open architecture commercial loan book channel has completed 1 year and loan book size has touched Rs 136 crore with team of 48 employees.

The bank has achieved all targets under priority sector lending.

The bank has reduced low yield advances of Rs 1600 crore in FY2024, amounting to 2.5% of the loan book.

The co-lending loan book stood at Rs 1900 crore end March 2024.

The bank has improved net interest margin by 6 bps in Q4FY2024 to 4.19% and the margin remains about the target of 4%.

The bank has witnessed 11 bps increase in cost of deposits in Q4FY2024 against the guidance of 15 bps.

The yield on advances increased by 8 bps against guidance of 10 bps.

The yield on investment increased by 17 bps in Q4FY2024.

The bank has fully provided for all liabilities with respect to employee wage revision. As against the requirement of Rs 114 crore of provisions for employee pension benefit, the bank had created provisions of Rs 74 crore in Q3 and balance Rs 40 crore in Q4FY24.

The bank has created additional Rs 25 crore of floating provisions raising it to Rs 100 crore.

The bank expects its employee wage bill at Rs 325 to 350 crore from Q1FY2025.

The credit cost stood at 0.65% in FY24, while the bank targets credit cost of around 75 bps in FY2025.

The bank has recorded low fresh slippages of Rs 130 crore or 0.67% in Q4FY2024.

The bank expects to maintain the fresh slippage ratio below 1% with substantially lower SMA loan book.

The bank has recorded recoveries in written off accounts of Rs 341 crore in FY2024 up from Rs 208 crore in FY2023.

The bank has recorded recoveries of Rs 132 crore from written off accounts in Q4FY2024.

The bank has reduced GNPA ratio to 1.4% and NNPA to 0.4%. The bank expects to continue to maintain GNPA below 2% and NNPA ratio below 1%.

The bank has witnessed decline in the restricted loan book to 0.96%, while the bank is holding provisions of 42% against the restructured loan book.

Bank has added 2500 employees taking the overall employee base to 9000 employees end March 2024.

Guidance

The bank has reduced the share of corporate loan book from 37% few years ago to 19%.

The bank would continue to remain focused on the retail loan book.

The bank will also focus on reducing the low yield advances to support margins.

The bank is targeting loan growth of 14% for FY2025.

The bank would maintain CD ratio around 85%.

The bank added 39 branches in FY2024, while it targets to add 80 light branches and 20 regular branches in FY2025 mostly in the southern and the western part of the country which would help the bank to penetrate liabilities.

The share of EBLR linked loan book stands at 44% and MCLR at 42%.

The bank is targeting to maintain NIMs around 4% in H1FY2025. Any change in the policy rates will have impact on the margins.

The cost to income ratio is expected to be around 50% in FY2025.

The focus would be on margins to maintain the RoA above 1.6-1.65%.

The bank has the achieved RoA of 1.63% in FY2024 and 1.76% in Q4FY2024. The RoA will be above 1.5% in all quarters FY2024.