KTKBANKNSEQ3FY25January 31, 2025

The Karnataka Bank Limited

11,715words
83turns
10analyst exchanges
8executives
Management on call
Srikrishnan H
MANAGING DIRECTOR AND
Sekhar Rao
EXECUTIVE DIRECTOR – KARNATAKA BANK LIMITED
Vinaya Bhat P.J
CHIEF COMPLIANCE OFFICER
Ravichandran S
HEAD OF CREDIT SANCTIONS
Jayanagaraja Rao S
HEAD OF BRANCH
Raghuram H S
CHIEF RISK OFFICER – KARNATAKA BANK LIMITED
Sham K
COMPANY SECRETARY KARNATAKA BANK LIMITED
Soham Roy
HEAD INVESTOR RELATIONS – KARNATAKA BANK LIMITED
Key numbers — 40 extracted
rs,
les and the product organization which are functioning well. We have opened two retail asset centers, one in Bangalore and the other one in Mangalore yesterday and there are three other locations whic
12%
strike a balance between book quality growth and also hope to see the advances book grow by about 12% during FY '25 on a consolidated overall basis. On the backdrop of lower GDP projections and the
INR 1,77,978 crore
. Aggregate business turnover, which is advances plus deposits stood at a record all-time high of INR 1,77,978 crores. It is up by 10% on a year-on-year basis as against INR 1,61,936 crores as of December '23 corre
10%
ich is advances plus deposits stood at a record all-time high of INR 1,77,978 crores. It is up by 10% on a year-on-year basis as against INR 1,61,936 crores as of December '23 corresponding period.
INR 1,61,936 crore
a record all-time high of INR 1,77,978 crores. It is up by 10% on a year-on-year basis as against INR 1,61,936 crores as of December '23 corresponding period. The PAT has decreased from INR 331 crores in the corres
INR 331 crore
s against INR 1,61,936 crores as of December '23 corresponding period. The PAT has decreased from INR 331 crores in the corresponding quarter of last year to INR 283 crores and the decrease is explained by the
INR 283 crore
period. The PAT has decreased from INR 331 crores in the corresponding quarter of last year to INR 283 crores and the decrease is explained by the fact that there are certain changes in the accounting polic
INR 1,020 crore
AT and which we have continued in this quarter also. So on a 9-month basis, the bank made about INR 1,020 crores of PAT compared to INR 1,032 crores for the corresponding period last year. The accounting chang
INR 1,032 crore
is quarter also. So on a 9-month basis, the bank made about INR 1,020 crores of PAT compared to INR 1,032 crores for the corresponding period last year. The accounting change on treasury which is essentially f
INR 100
lone. If we had taken into account as per the earlier policy, we would have actually gained about INR 100-plus crores on that itself. So this means that the bank technically would have made INR 1,020 cro
INR 100 crore
res on that itself. So this means that the bank technically would have made INR 1,020 crores plus INR 100 crores, that's INR 1,120 crores for this quarter. But this is, of course, applicable to all banks. So t
INR 1,120 crore
this means that the bank technically would have made INR 1,020 crores plus INR 100 crores, that's INR 1,120 crores for this quarter. But this is, of course, applicable to all banks. So this is something that I n
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Guidance — 20 items
Srikrishnan H
opening
“There's significant progress which has been achieved in these projects, and we hope to see the benefits in the upcoming quarters.”
Srikrishnan H
opening
“The bank has opened 6 new branches this quarter, taking the overall branch count to 937 and we plan to open about 10 to 15 new branches in this Q4.”
Srikrishnan H
opening
“The bank will definitely try to strike a balance between book quality growth and also hope to see the advances book grow by about 12% during FY '25 on a consolidated overall basis.”
Srikrishnan H
opening
“So we are on track to launch a few more products in the last quarter of this year, the Q4.”
Srikrishnan H
opening
“But with our improved focus on higher-yielding retail and direct to corporate deposits, on a combined basis, we expect that this will get eased out a little bit as we move into the next few quarters.”
Srikrishnan H
opening
“And we expect that the NIM would improve by at least about 10 to 20 bps, depending on the kind of churn that we are doing in the corporate low-yielding loans as well as the retail loans that we are booking.”
Srikrishnan H
opening
“So considering the potential churn, we expect that there will be an overall portfolio loan yield increase of at least about 20 to 30 bps as we go forward.”
Srikrishnan H
opening
“So the target for FY '25 would be that slippages will remain well below the 2% mark.”
Srikrishnan H
opening
“As far as LCR is concerned, the liquidity coverage ratio, as of 31st December, we stand at 152%, up from 143.93%, which is actually good news and also as against statutory target of 100%.”
Srikrishnan H
opening
“But this is fundamentally because of the book growth that we are seeing, and we expect to close this financial year anywhere between 1.1% to 1.2% and 1.2% has been the guidance.”
Risks & concerns — 10 flagged
I have with me in the conference, our Executive Director, Sekhar Rao; our CFO, Abhishek S Bagchi; our Chief Compliance Officer, Vinaya Bhat P.J, our Head of Credit, Ravichandran S; our Head of Branch Banking, Jayanagaraja Rao S; our Chief Risk Officer, Raghuram H S and we also have our Company Secretary, Sham K.
— Srikrishnan H
The 6 categories are Best tech talent organization, best IT risk management, best technology bank, best Fintech and DPI adoption, best digital sales, payment and engagement and best AI and ML adoption.
— Srikrishnan H
On the backdrop of lower GDP projections and the banking industry witnessing pressure impacting credit growth, slower CASA, etcetera, the bank continues to focus on our critical parameters.
— Srikrishnan H
So technically, we are maintaining the NIM more or less at the same level despite the pressure on the cost of funds.
— Srikrishnan H
Definitely, there is a 25 bps difference, and that is where the NIM is also under pressure, and that will get eased out by the growth in CASA as well as the retail term deposits as we go forward.
— Srikrishnan H
Now on quarter- on-quarter, if we have to actually judge because it's very difficult to judge on a 9 months or even compare it Y-o-Y because all the efforts that we are putting out should be seen incrementally every quarter.
— Priyank
My other question is actually, as per your note, if we had to exclude the impact of accounting policy, our cost to income still would have been at 58.7% for Q3.
— Priyank
In that case, there could be some more pressure on margins that you might see in the first quarter.
— Anand Dama
So, my question was basically the penal interest plus higher interest reversal on NPAs could keep the pressure on the margins in the near term intact.
— Anand Dama
So I do not see that as any pressure, because we are quite comfortable there.
— Srikrishnan H
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Q&A — 10 exchanges
Q
My question is actually on the strategy on the loans as well as on the deposits. Now on quarter- on-quarter, if we have to actually judge because it's very difficult to judge on a 9 months or even compare it Y-o-Y because all the efforts that we are putting out should be seen incrementally every quarter. So incrementally, this quarter, we have disbursed or we have a lending book of more than, say the book has increased by INR 2,500 crores. The incremental loans has been into retail and large corporates, both equally. Now if we are on the strategy to focus more on RAM, why the yields on loans h
Srikrishnan H
Priyank, I think there are two parts to this question. One is on the advances side. So as you’re right, that we have grown the quarter and we've grown the quarter with a whole lot of improvement as well as the overall retail book is concerned. But it is also a fact that there were NBFC and the rest of it, which got paid out during the same quarter. As a result, while the number that we have put up, it has happened over the quarter for it to play out for the full quarter would happen only in the following quarters. It doesn't happen immediately in the same quarter. So the real increase in the N
Q
So my question is as the bank has improved a lot on the quality aspect as we can see from the improvement in slippages and credit costs? So now what are the things the bank is going to focus so as to improve the NIMs and profitability further?
Srikrishnan H
So Manik, I think we already said this earlier very clearly that the bank's growth in advances will come from the retail and the agri and the mid-market segment and also the retail MSME segment as well. So as a result, between the mid-corporate book and the retail RAM segment, there will be a growth and there will be better yields. So that is strategy number 1. The second is that we are building the CASA book. So there is a sales team, over 100 people who are focusing only on CASA outbound sales teams and they're all staff. And the second part is that we do have the retail term deposit where t
Q
Sir, if I look at your performance in the last 1 year, we have been tracking all the peer banks also. So, we understand the industry-wide issue. But I think your performance amongst all peers in terms of the yield on advances dropped or cost of deposit increased, which is probably the worst. And this is despite around 1,000 basis points additional cost to income that we have taken. And sir, that was supposed to help us on these parameters, bring better advances at better yields and lower down our quarter deposit by getting us lower cost of deposit CASA etc. So it seems that the execution on th
Srikrishnan H
So Yash, just to kind of put things in perspective, you should not have this isolated view as far as Karnataka Bank is concerned for the past 1 year because you need to look at the historical past. Prior to 2023, the bank overall deposit growth as well as advances growth was all at single digit. Now that is something because of the transformative steps that the bank has taken including management leadership changes at multiple levels and also making sure that the existing management integrated with the bank and the investments that the bank has made into technology for the transformative steps
Q
My first question would be what is the proportion of gold loans in the overall loan portfolio? And what is the percentage of agriculture loan book comprising gold loans?
Srikrishnan H
So we would be about 10% of the overall book, approximately I'm giving you that on a book size of about INR 77,500 crores, we will be closer to about –INR 7,000 crores to INR 8,000 crores. So that will be about 10% approximately. That is on the gold book. The breakup of agri and non-agri within the gold book, let me just pull it out and we'll send it to you. Okay. And the next question would be with respect to the RBI regulations. Any discussions that have been held with the regulators regarding gold loan, particularly the LTV norms and the loan rollovers, etc? Okay. One second, I'll read out
Q
Yes, sure. I'm asking about any discussions held with the regulators regarding gold loans, LTV loans and loan rollovers?
Srikrishnan H
No, there's no special discussion that we've had with regulator on this. In a normal, whatever is there as part of the normal inspection and audit, et cetera, is something that happens on an annual basis.
Q
Sir, can we say that the cost of funds have peaked out now? The reason I'm asking you is that in your TV interview on December 12, you had mentioned that the cost of funds are peaked up and we have again a sequential increase in the cost of funds?
Srikrishnan H
Yes. So I would think so. But of course, the market, while we are not aggressive on the overall deposit numbers in terms of the interest rate that we offer even on the retail, there are banks which are offering 8% on retail deposits, term deposits, which we are still at about 7.5%. So that way, we're still maintaining. But I think the whole market scenario has to be looked into, which is the rate cut that is widely anticipated and also the fact that the overall impact as far as the bank is concerned. And the last part is that we have to actually neutralize this by increasing CASA. Now the whol
Q
Sir, I just had one question. Why is there a difference in the net worth that is reported in the presentation versus what is given in the result?
Srikrishnan H
Net worth. So... If I add the capital and reserves and surplus as given on Page 13 of the presentation versus I think INR 11,320 odd crores which is given in the result? Okay. Allow us to check this, please. One second, CFO is wanting to say something. Sir, we will get back to you. Maybe it is revaluation reserve. That's what they are saying. It is revaluation reserve is what the team is confirming to me which is at INR 519 crores. Got it. That is okay.
Q
My first question is primarily on our margins that we have seen a dip during the current quarter Please go ahead. as you have already guided for the full year. The penal interest stuff is largely behind now on a quarter-on-quarter basis, if I have to look at it or there could be more impact because of that, number one. Number two is that ideally, I think in the fourth quarter, we tend to see higher NPA formation - - third quarter versus second quarter was higher and fourth quarter ideally should be higher as there will be lot of restructured loans slipping into NPA. In that case, there could b
Srikrishnan H
Anand, what you wanted to know. Just kind of to confirm one is that our overall mix of the loans and the fact that we are looking at the yield to increase by 10 bps to 12 bps as far as NIM is concerned, that is something which we are well on track. So that is the question number 1 that you had asked. And I do not see that as an issue going forward. So I don't think that we are in any way revising that or saying that we will not be able to achieve. That's one. The second part is that as far as - the second part which is related to the margins. Now the fourth quarter, the fourth quarter is somet
Q
Firstly, if you sum it up, sir, although you have very elaborately explained us and given your views and thoughts on the way ahead, but taking into account the factors that are influencing the banking industry currently, and when we look at our interest expended part, that is not lying in commensurate to the increase in interest income. So firstly, sir, going ahead for a year as a whole, since you have articulated to look at the 9 months, how confident are we to match our operating profits for the year ending 31st March '25, then on a comparable basis to 2024?
Srikrishnan H
So 2024, we have closed it out with INR 1,306 crores. And 9-month period, we had INR 1,032 crores. So the last quarter, if you look at the current, we are at INR 1,021 crores compared to INR 1,032 crores. So we are like hardly any different because hardly some INR 10 crores to INR 11 crores difference is there. So the last quarter is always the best quarter for the bank in the past. So I think we are well positioned to surpass the previous year number. And also the fact that you need to take into account that compared to the last year, the treasury income, which is on account of the AFS book,
Q
Thank you. I would like to thank the support and the interest in participation today as well as in various other investor conferences as part of our overall engagement with investors is concerned. On behalf of the management team who is present here and on behalf of the entire Karnataka Bank workforce, I would like to thank you all and we hope that we'll be able to stand up to your expectations in the following quarters and coming up quarters. Thank you so much.
Management
Speaking time
Srikrishnan H
33
Moderator
12
Anand Dama
6
Priyank
5
Yash Dedhia
5
Amey Chheda
5
Manik Bansal
4
Subhanshi Rathi
4
Saket Kapoor
4
Anant Mundra
3
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Opening remarks
Srikrishnan H
Thank you, Yashashri. Good evening to all, and a very warm welcome to our Q3 FY '25 Earnings Call. I have with me in the conference, our Executive Director, Sekhar Rao; our CFO, Abhishek S Bagchi; our Chief Compliance Officer, Vinaya Bhat P.J, our Head of Credit, Ravichandran S; our Head of Branch Banking, Jayanagaraja Rao S; our Chief Risk Officer, Raghuram H S and we also have our Company Secretary, Sham K. We also have our Investor Relationship Head, Soham Roy with me. Welcome to all once again. We also want to take this opportunity to wish you all a very, very happy 2025 and a great year ahead. As all of you know, at the bank we've been working with renewed energy on the overall restructuring and transformation processes, really end-to-end, looking to end this financial year ‘25 on a real high note. The bank has continued to see progress in top line growth with a lot of focus on retail and direct- to-corporate advances. This is a strategy that we had mentioned in the last two quart
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