Release Date: January 20, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Karur Vysya Bank Ltd (BOM:590003, Financial) reported a strong quarter with consistent growth in key performance metrics such as growth, profitability, and asset quality.
- The bank's total business grew by 3% during the quarter, with advances and deposits both increasing by 3%.
- Retail banking saw a significant year-on-year growth of 20%, driven primarily by mortgages and jewel loans.
- The bank maintained a healthy Net Interest Margin (NIM) of 4.03% for the third quarter, despite a 10 basis point increase in the cost of deposits.
- Gross NPA has been reduced to 0.83%, and the bank aims to maintain it below 2%, reflecting strong asset quality management.
Negative Points
- Corporate loan book experienced a 2% decline during the quarter due to a cautious approach towards sectors with lower yields.
- Challenges persist in growing CASA balances, with a slight reduction of 0.23% sequentially.
- Operating profit remained flat at INR815 crores, indicating a lag in business growth relative to expenses on new initiatives.
- The bank's cost-to-income ratio is at 47.27%, with efforts ongoing to keep it below 50%, highlighting cost management challenges.
- The bank anticipates a moderated increase in the cost of deposits by 10 basis points in the next quarter, which could impact future margins.
Q & A Highlights
Q: Can you elaborate on the regulatory changes regarding gold loans and how they affect your business processes?
A: The Reserve Bank of India has issued guidelines on gold loans, which we are fully compliant with. These include ensuring documentary evidence for the purpose of loans and stopping the rollover of loans. We have already implemented these changes, and they do not negatively impact our growth or customer acquisition.
Q: What is the impact of Expected Credit Loss (ECL) provisioning on your financials?
A: We have been preparing for ECL provisioning by maintaining sufficient floating provisions. We have provided INR 25 crores each quarter this year, and we believe we are adequately covered for any eventuality when ECL comes into play.
Q: Can you provide insights into the recovery from technically written-off accounts?
A: We have recovered INR 175 crores this quarter from technically written-off accounts. We expect to recover INR 400-500 crores over the next four quarters. Our focus is on strengthening legal and disposal teams to enhance recovery efforts.
Q: What are your strategies for fee and CASA growth, given the current challenges?
A: We are focusing on both acquisition and retention. While acquisition is progressing, retention remains a challenge due to outflows to mutual funds and real estate. We have a dedicated servicing team to reconnect with customers and improve retention. Fee growth is impacted by our strategic focus on retail and commercial segments over corporate advances.
Q: How do you view the NIM outlook for FY26, and what factors could influence it?
A: It's too early to predict FY26 NIM due to dynamic market conditions. However, if RBI cuts rates and deposit costs remain high, maintaining NIM above 4% could be challenging. We are cautious about increasing unsecured lending to protect NIM.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
