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Questions across 2 calls

Ramesh Babu

Firm not listed in source transcripts

Karur Vysya Bank Limited

Karur Vysya Bank Limited CC-Jun25.pdf · 2025-07-24
On behalf of Karur Vysya Bank, I extend a warm welcome to everyone joining our Bank's Q1 Earnings Call for the Financial Year 2 026. Our Financial Results and accompanying Presentation have been made available on our website and we trust you have had the opportunity to review them thoroughly in advance of this meeting. As a summary of our discussion during Q4 call in May '25, we maintain a cautiously optimistic outlook for the Financial Year 2 025-26, emphasizing the importance of managing margin pressures and closely monitoring asset quality. We are pleased to report that our performance indicators align with our previously issued guidance. Notably, we successfully front-loaded growth in the first quarter of this financial year, consistent with our approach over recent years. Our sustained and inclusive results across all three metrics – growth, profitability, and asset quality, demonstrate the ongoing strength of our performance since the beginning of the year. As of 30 th June 2025, the Bank's total business reached Rs . 1,96,024 crores reflecting our sustained growth momentum in the first quarter with an overall business increase of 5% quarter- on-quarter and an year-on-year growth of 15%. Advances rose to Rs. 89,374 crores, representing a growth of 6% quarter-on-quarter, while deposits increased to Rs. 1,06,650 crores, achieving a quarter-on-quarter growth of 4%. As previously indicated during the Q4 earnings call for FY'24- 25, regarding the business mix of our advances portfolio, we have placed increased emphasis on the RAM verticals. Reflecting this strategic focus, the RAM segments have grown by 6% quarter-on-quarter that is 20% year-on-year, now accounting for 86% of the total advances portfolio. After two years of negative growth, our corporate book has registered a Q OQ growth of 6%, although it remains negative on a year-on-year basis. Retail advances increased by 8% quarter-on-quarter, primarily driven by growth in jewel loans and mortgage loans. The synergy between the Branch Channel and the Open Market Channel is progressing well, as evidenced by an 11% increase in mortgage loans during the quarter. The early bookings of assets support consistent interest income generation throughout the year. Retail jewel loans registered a 23% growth during the quarter. Considering the low yields and increased competition, we took a conscious call of going slow in housing loans and vehicle loans. We maintained a cautious approach towards unsecured personal loans and BNPL (buy now pay later) loans during this period. The vertical is planning to come out with products in affordable home loans by sourcing as well as by co-lending model. It has also identified 144 branches to focus more on mortgages under the branch channel. The commercial business segment demonstrated a 5% growth over the previous quarter, driven by higher disbursements in both the small business group and business banking group, 30% quarter- on-quarter. As part of our ongoing re-engineering initiatives for the small business group, SBG coordinators have been appointed at Divisional Offices to provide enhanced support to the branches. Despite various challenges, the agriculture loan portfolio recorded a growth of 4% during the quarter. Agri jewel loans constituted 91% of the portfolio and other agri -loans constituted 9%. LTV of agri -jewel loan is 64.28%, indicating availability of sufficient margins. The Reserve Bank of India has issued new directions regarding lending against gold and silver collateral, which is expected to be beneficial for us. Implementation of that is currently underway. A favorable monsoon in many regions is project ed to further stimulate growth in this segment. While we remain cautious regarding the MFI segment, coverage under CGFMU has commenced from April 1, 2025. The corporate and institutional loan portfolio experienced a 6% increase during the quarter, primarily driven by heightened disbursements in real estate, food processing and NBFCs. Increased growth percentage is also on account of lower corporate portfolio base. Additionally, the vertical continued to invest in corporate instruments of entities to lock the yields, utili zing these as credit substitutes. The Bank's liability business constitutes to 54% of the total business of the Bank. Deposit growth remains a primary strategic focus for the Bank, with the past two years featuring numerous initiatives such as the establishment of a CASA acquisition channel, enhancement in CASA products and strengthening deepening teams in the branches to protect the ETB book. Total deposits increased by 4% during the first quarter, driven by gains in both retail term deposits and CASA. CASA balances grew by 5% over the sam e period. The CASA acquisition team has made significant progress in acquiring premium NTB customers. Our new products contributed 56% of the CASA NTB book growth during the quarter. The team is focusing on Gen -Z and start-ups by offering personaliz ed products and for premium customers offering exclusive options. The team is actively engag ing with the customers during the first 90 days of the on boarding to identify their needs and cross -sell suitable products and after that these customers will be handed over to the branches which will be nurtured by the branches. Regarding ETB customers, targeted engagement by the Branch Sales and Service Executive (BSSE) team at branches and a strategic emphasis on reactivating inoperative accounts contributed to higher book balances. Additionally, more than the anticipated end -of-the-quarter inflows into current accounts to some extent further supported overall deposit growth. Retail deposits increased by 5% during the quarter. Despite the reduction in rates for the special term deposit scheme s, inflows into RTD remained steady. During the first 2 months, we canvassed for retail term deposits to fund the advance growth which was front-loaded. This has enabled us to have some sizeable growth in retail TD. As customers knew that interest rates are going to come down, they too were anxious to lock their interest rate which we took advantage of that too. This has contributed to a decrease in reliance on bulk deposits throughout the quarter. Regarding margins, we had provided guidance in the range of 3.7 to 3.75 for Financial Year 26. Although we anticipated a rate cut of 25 to 50 basis points during the quarter, the actual reduction was 75 basis points. I am pleased to report that we could successfully navigate the quarter and maintained our net interest margin at 3.86% representing a decrease of 19 basis points from the previous quarter as there will be a lag in reduction in the corresponding interest rates of deposits which is in line with the industry trend. The cost of deposits increased slightly by 3 basis points on a sequential basis as the majority of growth has come from term deposits rather than the CASA. The overall cost has increased and the maj ority of repricing is anticipated to occur between September and November for the time deposits. We expect the cost of deposits to remain stable at current levels over the next quarter. Additionally, savings account rates for one segment , were also adjusted downwards during the quarter and we are likely to reap the benefits from Q3 o nwards to start with. The yield-on-advances declined by 21 basis points during the quarter. Our loan portfolio comprises 53% EBLR linked loans and 35% MCLR linked accounts. Approximately 37% of the EBLR portfolio is expected to be repriced in the upcoming quarter. We antici pate a further reduction of 10 basis points in the yield on advances in the next quarter. The yield-on-investments declined by 9 basis points during the quarter attributable to a reduction in yields in general in the investment book. This is due to a reduction in the interest rates by RBI. Maturity of high -yielding CDs and CP securities, which were replaced by lower -yielding instruments and incremental SLR investments, are being made at yields lower than the existing portfolio average, thereby pulling down the average. With the current visibility, as guided during Q4 results on call, we endeavor to maintain our full-year guidance for net margin at 3.7-3.75 for FY 2025-26. We anticipate that a reduction in the cost of deposits will become more apparent by the end of Q3, contributing to an improvement in overall NIMs by the year-end. The operating profit for the quarter was at Rs . 805 crores, reflecting an 8% increase compared to the same quarter in the previous year, but a 3% decline sequentially. Non-interest income for the period stood at Rs . 447 crores, down from Rs . 509 crores in the previous quarter. Recoveries from written off accounts amounted to Rs. 78 crores, compared to Rs. 182 crores in the prior quarter. This decrease was partially offset by treasury gains of Rs. 79 crores during the quarter, up from Rs. 16 crores previously. We had guided recoveries from the written off accounts would be similar to last year, and the recoveries would not be even every quarter. This point also we have guided during last call, but overall during the year the recoveries would be around Rs. 600 crores which we feel will be able to achieve. Our operating expenses for the quarter stood at Rs. 721 crores, representing a sequential decrease of Rs. 42 crores. With planned recruitments having been completed last year, establishment expenses remained stable at Rs. 365 crores. Other operating expenses were effectively controlled at Rs. 356 crores. The cost-to-income ratio for the quarter was 47.22%, which remains within the guided range of less than 50%. Net profit for the quarter was Rs. 521 crores, an increase of 2% quarter-on-quarter and 14% year-on-year. During the quarter under review, an allocation of Rs . 118 crores was made towards NPA migration, standard assets and restructured assets, resulting in a credit cost of 0.54 basis points (annualized). No additional accelerated provisions were required this year as adequate buffers have already been established over the past 2 years. Gross slippages for the quarter amounted to Rs . 189 crores, re presenting 0.21%, on an annualized basis it comes to 0.84% of the loan book, though there is a spike in SMA 30 -plus levels from 0.43% to 0.6% year-on-year basis, through ongoing diligent account monitoring, we are confident in our ability to maintain the slippage ratio below 1% levels as we have previously indicated. Owing to reduced slippages, improved recoveries and upgrades, as well as write-offs, our gross NPAs have declined sequentially from 0.74% to 0.66%. Our net NPA remains steady at 0.19% and we are committed to maintaining net NPA below 1% of our portfolio. The proportion of our standard restructured loan portfolio has further decreased to 0.57% of our total loans and continues to perform satisfactorily. At present, we do not anticipate any significant setbacks or slippages within this segment. Notably, a substantial portion is secured by collateral and we maintain a provision of 42% for this portfolio. The ROA for this quarter stands at 1.73%, slightly b etter than the guided range of 1.55% to 1.65%. Our CRAR Basel-III continues to be healthy and is at 17.36%, providing us comfortable headroom for growth. Our liquidity coverage ratio continues to be well above the regulatory requirement of 100%. Our Bank has successfully completed 109 years and is now entering its 110th year this month. I am pleased to announce that today the board has proposed a bonus issue of 1: 5, i.e. 1 share for every 5 shares held, subject to the approval of the shareholders. “Challenges are what make life interesting. Overcoming them is what makes life meaningful”, as noted by Joshua J. Marine. Despite some challenges, we began the first quarter on a positive note. Our team has demonstrated resilience in sustaining growth and we remain confident in our ability to continue this momentum throughout the remaining quarters. As we enter our 110 th year, we honor our history while looking ahead to the future and reaffirm our unwavering dedication to serving as a trusted partner throughout every customer's financial journey. I would like to express my gratitude to all our investors, analysts and stakeholders for their continued confidence and ongoing support. We are committed to upholding this trust through continued st rong performance in the future. To sum up, our guidance for the credit growth of above 2% over the industry growth continues for the rest of the quarters and accordingly, deposits will be raised. NIM for the full year will be in the range of 3.7% to 3.75%. Our GNP A is expected to be less than 1.5% and Net NPA less than 1% and slippages to be less than 1% and cost to income we aim to have below 50%. So, now I will be glad to respond to your queries. Thank you all.
Akshat, please go ahead. But your voice is breaking. We are unable to hear fully please.
Karur Vysya Bank Limited CC-Sep23.pdf · 2023-10-16
Thank you very much. Yes. Good evening to all, and welcome to The Karur Vysya Bank's Earning Call to discuss the results of quarter 2 of financial year 2024. I am pleased to mention that our bank continues to demonstrate its consistent performance in the second quarter of the year in terms of growth, profitability and asset quality. I am very happy to say that the bank has crossed historical milestone of total business of INR1.5 trillion, that is INR150,000 crores. You would appreciate t hat we had crossed INR1,25,000 crores in March '22, and the next INR25,000 crores has been crossed within a short span of 18 months. You will be glad to note that our performance in terms of credit growth, margin, ROA and delinquency is in line with our g uidance. I am sure you will not differ, if I say that, the outcome is on account of our continued focus on various initiatives we were implementing over the last few quarters. All of you would have gone through our detailed presentation on our quarter 2 numbers. I would like to share some of my thoughts on the performance of the bank during the quarter and our guidance for quarter 3. We were able to sustain the growth momentum during the second quarter as our total business grew by 4% and reached a level of INR153,516 crores. We have been guiding in our earlier calls about our focus on inclusive growth from all verticals with respect to advances. I am pleased to share that during the current quarter, we continue to maintain this, while commercial and corpo rate clocking 6% quarter -on-quarter each. Agriculture and retail segments have grown by 4% each. Our continued focus on MSME in metro, urban and semi - urban locations supported the growth under commercial segment. Corporate book, which has muted growth in last quarter improved during this quarter on account of higher disbursements. Retail growth is similar to last quarter, and the majority of the growth has come from mortgages, both residential and non -residential. Our focused effort on the distribution and benchmarking of our products to market -supported operating team to garner more business under these segments. The overall growth is a touch above on our annual guided growth of 14%, and we expect that the trend will continue. Our deposit growth was at 3% during the quarter, and the term deposits and CASA deposits were grown by 4% and 1%, respectively. We had highlighted about our liabilities acquisition team. Out of the planned resources of 1,300, we continue to build our retail acquisition team by onboar ding 367 resources during the second quarter, aggregating to 1,272 resources. Seamless integration with the original structure is being pursued, first to achieve the synergies of the branch and sales channel for augmenting larger business growth. Our YTD g rowth during the year so far is at 13%, and we plan to maintain the growth trend in tune with our trade expansion. We had indicated in the last two calls about expected compression in NIMs in the first half year and would be in the range of 4%. Net intere st margin reduced by 12 basis points on sequential basis during the quarter and is now at 4.07%. For the first half year, we are able to maintain NIM at 4.13% in spite of the NIM compression. Our net interest income has grown by 2% during the quarter and 16% year-on-year thanks to our consistent efforts in bringing the desired asset growth. While cost of deposits have gone up by 20 basis points, yield on advances increased by 7 basis points during the quarter, resulting in a compression of 12 basis points . Based on our historical pattern of renewal of deposits and fresh deposit acquisition, we expect that there will be a further increase in the cost of deposits to the extent of 20 basis points in third quarter, assuming no change in our deposit rates. Yiel d on investments has gone up by 13 basis points during the quarter, and it is estimated to go up by 10 basis points in the next quarter. We have increased our MCLR by 25 basis points during the quarter and initiated many efforts in maximizing returns from the credit book and we expect 10 to 15 basis points increase in the yield on advances maybe in the next two quarters. Considering all these factors and without taking into any policy rate changes, we expect that NIM will stabilize at 3.8% at the exit quarter of the current year. We have achieved ROA of 1.57% in this quarter in spite of reduced margin, our business growth, fee income, lower credit cost and recoveries in written -off accounts continue to support us to keep the ROA above 1.5% levels. Our slippages continue to be under control, and our gross slippages for the quarter is less than 1%, which is as per our guidance. We continue to have negative net slippages taking into account recoveries from the written-off accounts this quarter also. Our SMA 30 + for the entire loan book at the end of the quarter continues to be at less than 1%. We are confident that we will continue to keep the ratio below 1% as guided in our earlier calls. Our efforts on recovery of technically written-off accounts are continuing to yield results as we have recovered a sum of INR86 crores during the quarter. Total recoveries till first half of the year are INR144 crores. Due to lower slippages, recoveries and write -offs, our gross NPA has come down to 1.73%, and we expect that we will continue to maintain at below 2% levels. For the quarter under review, we have provided a sum of INR102 crores towards NPA migrations, standard assets and prudential provisions. We estimate that credit costs for the current year would be in the range of 75 basis points as guided. As done in last quarter, we have provided a sum of INR25 crores more towards floating provision to meet any contingency, including ECL and provision available now under this head is INR50 crores. Our net NPA has com e down to 0.47%, and we will continue to maintain net NPA at less than 1% of our loan book. Our standard restructured book is further reduced to 1.2% of our loan book , and we hold a provision of 25% of a standard restructured book. Our cost-to-income ratio is at 49.14% for the current quarter, which is sequentially higher over previous quarter. This is mainly due to additional provision made towards superannuation benefits on account of wage revision of employees. Bank has been providing 15% of our eligible wage bill from November '22 onwards on the estimated wage bill increase. Now it is estimated a sum of INR100 crores is required towards superannuation benefits on account of wage revision. And we have provided a sum of INR33 crores during the current quarter and the balance amount will be provided in the next two quarters. So far, we have provided INR117 crores. So if you see that including the current quarter additional provision, the additional cost is a onetime expense, and our normalized staff cost would be in the range of INR290 crores to INR300 crores per quarter. As indicated earlier, our cost-to-income ratio would be in the range of 45% to 50%, and this is our endeavor. Our CRAR continues to be robust and is at 16.84%, providing us comfortable headroom for growth. Our liquidity is well managed and the CD ratio is around 84%. During the quarter, we opened 16 branches predominantly in semi -urban and total branches opened during the first half of the year is 25 branches and opened one digital banking un it at Chennai. Our new initiatives of KVB Smart under the Commercial Banking business is progressing with a portfolio of INR49 crores. It added Madurai center during the quarter in addition to Coimbatore, Chennai, Hyderabad locations with a team size of 48 members. It is in a formative stage. It will take some time for delivering what we thought. Business under NEO, co -lending business, and transaction banking and the precious metal continue to perform well. Other business performance highlights are given i n our presentation. We have been consistently improving our performance over a period of last two years, and the trend is continued in the half year also. I would like to conclude with the quote of Napoleon Hill, strength and growth come only through continuous effort and struggle. Our effort would be to focus on sustaining our growth momentum to ensure that our ROA is above 1.5% levels going forward. I am grateful to all our investors, analysts and stakeholders for their confidence and continued support, w hich we will reciprocate through our better performance in the days to come. Now I'll be glad to respond to your questions. Thank you.
Term -- it's 20, cost of term deposits.