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Karnataka Bank recorded 13% increase in the net profit to Rs 119.44 crore in the quarter ended September 2020 (Q2FY2021), driven by healthy growth in net interest income as well as non-interest income, while the bank has reduced cost-to-income ratio. The bank has sharply improved NIM above 3% in Q2FY2021. Further, bank has improved asset quality in Q2FY2021 with the sharp decline in fresh slippages and improved collection performance.
The CASA ratio has improved further to 29.2% end September 2020. However, the business growth was moderate at 3% end September 2020. On advance front, the share of retail loans further improved 51% at end September 2020.
Asset quality improves: Bank has improved asset quality in the quarter ended September 2020 with the dip in fresh slippages of advances.
* Fresh slippages of advances eased to Rs 2 crore in Q2FY2021 from Rs 167 crore in the previous quarter
* Meanwhile, the recoveries, upgradations and write-off stood at Rs 282 crore for the quarter.
* Outstanding standard restructured advances of the bank increased to Rs 558 crore (1.03% of advances) at end September 2020 compared to Rs 509 crore (0.94% of advances) at end September 2019.
* Stressed assets (NNPA and restructured advances) declined to 3.24% of advances at end September 2020 from 3.95% at end June 2020 and 4.26% at end September 2019.
* RWA increased 4% to Rs 52194.16 crore at end of September 2020 from a year earlier.
| Asset Quality Indicators: Karnataka Bank |
|
Sep-20 |
Jun-20 |
Mar-20 |
Dec-19 |
Sep-19 |
Variation |
| QoQ |
YTD |
YoY |
| Gross NPA (Rs Crore) |
2188.80 |
2557.64 |
2799.93 |
2777.46 |
2594.27 |
-14 |
-22 |
-16 |
| Net NPA (Rs Crore) |
1194.60 |
1630.65 |
1755.01 |
2058.04 |
1863.11 |
-27 |
-32 |
-36 |
| % Gross NPA |
3.97 |
4.64 |
4.82 |
4.99 |
4.78 |
-67 |
-85 |
-81 |
| % Net NPA |
2.21 |
3.01 |
3.08 |
3.75 |
3.48 |
-80 |
-87 |
-127 |
| % Provision Coverage Ratio |
75.44 |
67.93 |
64.70 |
59.34 |
59.19 |
751 |
1074 |
1625 |
| % CRAR - Basel III |
13.08 |
13.07 |
12.66 |
12.40 |
12.64 |
1 |
42 |
44 |
| % CRAR - Basel III - Tier I |
11.08 |
11.07 |
10.66 |
10.40 |
10.64 |
1 |
42 |
44 |
| Variation in basis points for figures given in percentages and in % for figures in Rs crore |
Business Performance:
Business growth slows: Business of the bank increased at slower pace of 3% yoy to Rs 127028 crore at end September 2020. Deposits increased 4% to Rs 72929 crore, while advances rose mere 1% to Rs 54099 crore at end September 2020. Credit-deposit ratio eased to 74.2% at end September 2020 from 75.4% at end September 2019.
CASA ratio improves: CASA deposits increased 11% to Rs 21275 crore. CASA ratio improved to 29.2% at end September 2020, compared with 28.7% at end June 2020 and 27.4% at end September 2019. Meanwhile, bank has sharply reduced bulk deposits by -69% yoy to mere Rs 26 crore at end September 2020.
Retail loans driving advances growth: Advances rose 1% at Rs 54099 crore at end September 2020. The corporate advance declined -5% to Rs 27309 crore, while the retail advance galloped 8% to Rs 26790 crore at end September 2020.
* Retail advances gained share to 49.5% at end September 2020 from 46.4% at end September 2019.
* Break-up of advances shows housing at 17.1% of the advances, agriculture - 12.7%, SME - 21.2%, medium enterprises - 3.7%, large enterprises - 10.4%, other personal loans - 1.0% and other - 10.4% at end September 2020.
* Priority sector loans (PSL) of the bank stood at 48.0% of advances at end September 2020, while consistently exceeding the regulatory PSL target of 40%, while increased from 46.3% a quarter ago and 43.6% a year ago.
Investment book of the bank increased 11% to Rs 19955 crore at end September 2020. Share of AFS book increased to 23.2% at end September 2020 from 20.3% a quarter ago and 27.6% a year ago.
The modified duration of AFS book declined to 3.90 years, while that of overall investment book was nearly flat at 5.55 years at end September 2020.
Network expansion: Bank has added 1 branch and reduced 8 ATMs in the quarter ended September 2020. Bank has the network of 859 branches and 1016 ATMs at end September 2020.
Book value stood at Rs 187.09 per share at end September 2020. Adjusted Book value (excluding NNPA and 10% of restructured assets) was at Rs 146.87 per share at end September 2020.
Quarterly Performance
NII growth accelerate, as NIMs jumps: For the quarter ended September 2020, the bank has posted -2% decline in interest income to Rs 1603.71 crore, while interest expenses dipped -9% to Rs 1028.84 crore. NII jumped 15% to Rs 574.87 crore, as net interest margin (NIM) jumped to 3.08% in Q2FY2021 from 2.82% in Q2FY2020.
Non-interest income spurts on treasury income jump: The non-interest income of the bank increased 21% to Rs 329.81 crore in Q2FY2021. The core fee income of the bank declined -43% to Rs 174 crore, while trading income surged 300% to Rs 156 crore in Q2FY2021 over Q2FY2020.
Net Total income rose 17% to Rs 904.68 crore in quarter under review.
Expense ratio improves: Operating expenses increased 13% to Rs 404.25 crore. The employee cost jumped 25% to Rs 204.62 crore in Q2FY2021, while the other operating expenses rose 2% to Rs 199.63 crore. Expense ratio declined to 44.7% in Q2FY2021 compared with 46.4% in Q2FY2020.
The operating profit increased 21% to Rs 500.43 crore in the quarter ended September 2020.
Provisions jump: Bank has witnessed increased in provisions and contingencies to Rs 322.13 crore in Q2FY2021 as against Rs 262.40 crore in the corresponding quarter last year.
The Profit before tax (PBT) increased 18% to Rs 178.30 crore in Q2FY2021 over Q2FY2020.
Banks tax provisions stood at Rs 58.86 crore in Q2FY2021 against Rs 45.12 crore in Q2FY2020.
Net profit moved up 13% to Rs 119.44 crore in Q2FY2021.
YTD Financial Performance:
For the six-months ended September 2020 (H1FY2021), the bank has posted 12% increase in net profit to Rs 315.82 crore. The net interest income improved 12% to Rs 1109.99 crore, while non-interest income jumped 76% to Rs 848.73 crore in H1FY2021. The expense ratio dipped by -839 bps to 39.9% in H1FY2021 compared to 48.3% in H1FY2020.
The operating expenses increased 10% to Rs 781.25 crore, while provision and contingencies surged 79% to Rs 831.20 crore. The profit before tax increased 15% to Rs 346.27 crore in H1FY2021. After considering 8.8% of effective tax rate, the net profit increased 12% to Rs 315.82 crore in H1FY2021.
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