Karur Vysya Bank conducted a concall on 15 May 2023 to discuss the financial results for the quarter ended March 2023 and prospects of the bank. B Ramesh Babu, MD&CEO of the bank addressed the call:

Highlights:

The bank has been consistently performing strongly for the last 4 quarters on business growth, profitability and asset quality front.

The bank has delivered RoA of 1.5% and RoE of 16% and cost to income ratio below 45% in Q4FY2023.

The net interest margin has improved to 4.37% in Q4FY2023. The bank has recorded four digit net profit for the first time in its history in FY2023.

The bank expects a 40-50 bps increase in its cost of deposits during next two quarters assuming no change in deposit rates.

However there may not be an equivalent increase in yield on advances as the majority of the rate hike has been already passed on.

The yield on investment has increased by 39 bps in FY2023 and it is expected to further increase by 25 bps in next 2 quarters.

The net interest margin is expected to be maintained around 4% in the next 2 quarters.

The bank expects to improve RoA to 1.5% in FY2024 from 1.27% in FY2023.

The bank expects its credit growth at 14% for FY2024. The bank is targeting 14% growth in deposits with a higher share of CASA deposits.

The bank is in the process of recruiting 1300 employees, of which 400 have already joined and the balance would join soon. This is expected to cause an additional cost of Rs 61 crore in FY2024. The new employee team would be focusing on Casa mobilization and third party product distribution.

The employee base of the bank stands at 7700 down from 8000 before 3 years ago.

The cost to income ratio is expected to marginally rise in FY2024, which would be helpful in raising the CASA deposit ratio to 40% in the next 3 years. Bank is targeting a cost to Income ratio of 45-50% for FY2024.

The bank expects its fresh slippage ratio to be contained below 1% in FY2024 compared with 0.75% for FY2023.

The credit cost was elevated in Q4FY2023 on account of balance sheet strengthening and tax planning.

The bank is targeting a credit cost of 75 bps for FY2024 driven by lower slippages.

The bank would continue to maintain net NPA ratio below 1% and the gross NPA ratio below 2% by end March 2024.

The capital adequacy ratio of the bank is at a comfortable level of 18.6% giving a lot of room for credit growth.

The restructured loan book stands at 1.5% with provision coverage of 21%.

Liquidity is well managed and credit deposit ratio stands at 85% end March 2023.

The bank has added 10 branches in FY2023 and it expects to add 35 to 40 branches in FY2024.

The share of MCLR linked loan book stands at 47% and EBLR at 37%.

The recovery in written off accounts was at Rs 208 crore for FY2023 and Rs 100 crore for Q4FY2023.

The bank has a technically written off book of Rs 3000-3500 crore, of which the recoverable amounts stands at Rs 1500 crore and the bank is targeting recoveries of more than Rs 200 crore in technically written off accounts in FY2024.

The bank has created Rs 110 crore provisions for restructured loan book on account of a good profit year.