Capitaline

Analyst Meet / AGM 01-Feb-18

Conference Call

Karur Vysya Bank

Watchlist accounts of Rs 650 crore may slip to NPA category over next two quarters

Karur Vysya Bank conducted concall on 31 January 2018 to discuss financial performance for the quarter ended December 2017 and the prospects of the bank. P R Seshadri, MD&CEO of the bank addressed the call:
Highlights:

The bank has recorded strong 17% loan growth end December 2017 over December 2016, driven by 18% growth in commercial advances, 20% growth in agricultural loans and 18% rise in retail loans. The corporate loans also increased 11% end December 2017.
The bank is focusing on building strong retail and commercial loan book. It proposes to implement digital and algo based credit underwriting system for retail and commercial loans and it is in the process of developing scorecard for loan underwriting. The bank proposes to introduce all range of retail loan products.
The retail loan book of the bank stood at Rs 7000 crore end December 2017, while the bank aims to double its retail loan book in the near term. As per the bank, it has retail customer base of 7.5 million, which provides strong growth opportunities for the retail loans segment.
The bank has set up centralized collection centre, which is focusing on recoveries of SMA - 0 category loans.
The bank has substantially expanded its branch network raising the network size to 773 branches end December 2017, while it would go slow on new branch addition and focus on expansion of digital distribution network, going forward.
The bottomlines of the bank were impacted due to higher provisioning in the quarter ended December 2017. The bank has created provisions of Rs 325 crore in Q3FY2018, of which credit related provisions were Rs 306 crore.
The bank has witnessed fresh slippages of loans amounting to Rs 638 crore, of which corporate sector contributed Rs 580 crore of slippages, commercial loans Rs 59 crore and Agriculture Rs 1 crore in Q3FY2018.
As per the bank, the size of its watchlist accounts had stood at Rs 1200 crore and September 2017 of which Rs 550 crore of loans slipped to NPA category in Q3FY2018.
The balance watchlist accounts of Rs 650 crore may slip to NPA category over next two quarters. Of the balance watchlist accounts, about 314 crore of loans are restructured under various schemes.
The bank has exhibited 10 bps sequential decline in margin to 3.71% in Q3FY2018, mainly driven by higher interest income reversals.
The securities receipt with the bank stood at Rs 500 crore, with reasonable amount of provisions.
The bankers showed increase in cost-to-income ratio, as it is added approximately 100 branches and 800 employees in last one year, while the bank is also investing in digital technology.
The bank has sold priority sector loans worth Rs 200 crore in Q3FY2018, which has contributed to fee income, while fee income from insurance product sales also contributed to the overall other income growth.

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