Karur Vysya Bank conducted a concall on 17 July 2023 to discuss the financial results for the quarter ended June 2023 and prospects of the bank. B Ramesh Babu, MD&CEO of the bank addressed the call:

Highlights:

The bank has continued to exhibit strong performance on the growth earnings and asset quality.

The business of the bank has increased by 4.88% on sequential basis end June 2023 driven by 4.5% growth in advance with strong growth across all segments. The focus of the bank is on MSME loans in the urban area and gold loans in the rural area which has contributed to the growth. The retail loan book of the bank has expanded by 4%.

The disbursements in the corporate segments were healthy, but the bank has allowed repayment of low yielding advances in the corporate segment which has impacted the growth of the corporate loan book.

The overall loan growth was above 14% and the bank expects the trend to continue going forward.

The deposit growth was somewhat supported by the deposit of the Rs 2000 notes.

The bank has further recruited 425 staff in Q1FY24 and total 925 out of the 1300 recruitment proposed for mobilizing retail business. The bank expects the performance of this new team to reflect from H2FY2024.

Net interest margin of the bank has declined by 18 bps qoq to 4.19% in Q1FY24.

The bank expects further increase in cost of deposits by 20 bps in Q2FY24. The bank has witnessed 8 bps increase in yield on investment in Q1FY24 and expects further 10 bps rise in Q2FY24.

The bank has reduced the deposit rate on its special deposits by 20 bps in June 2023.

The bank is also expecting 10 bps improvement in yield on advances in Q2FY24.

The bank expects to maintain NIMs in the range of 4% assuming no change in the policy rates.

The bank has provided Rs 46 crore for annual performance incentive. The normalized employee cost is expected at Rs 300 crore per quarter.

Cost income ratio is expected at 45– 50% for FY2024.

The fresh slippages of loans were less than 1% in line with the guidance, while the bank has continued to maintain net negative slippages for the last 7-8 quarters.

The bank expects to maintain gross NPA ratio below 2% and net NPA ratio below 1%.

The credit cost is expected to be at 75 bps for FY2024.

The bank has created floating provisions of Rs 25 crore in Q1FY24 looking at strong earnings performance.

The bank opened 9 branches in Q1FY24 and expects to open another 38 branches in the rest of the Year.

The bank aims to maintain return on assets above 1.5%.

The share of the gold loan book stands at 25% against the limit of 30%.

The focus on reducing cost of funds and lending to the unsecured segment is expected to support margins of the bank.

The unsecured loan portfolio of the bank is below 2%.

The cost to asset ratio stands at 2.5% and the bank is focusing on reducing the ratio.

The employee base of the bank stands at 7900 end June 2023.