Karnataka Bank Ltd.

Get PDF

About the Company

Karnataka Bank Limited, is an ‘A’ Class Scheduled Commercial Bank based in Mangaluru in Karnataka, India. Karnataka Bank Limited has a network of 838 branches, 1374 ATMs and 300 e-lobbies/mini e-lobbies across 22 states and 2 union territories. It has 8,300+ employees and over 10 million customers throughout the country. Its shares are privately owned by over 1,85,000 shareholders. The tagline of the bank is “Your Family Bank across India.”

Q3 2019 Updates

Financial Results & Highlights

Detailed Results

1. 1. It was a good quarter for Karnataka Bank with 19% increase in revenues YoY.
   2. They also achieved PBT and PAT growth of 52%and 61% YoY.
   3. Their net NPA rose to 3% from 2.85% last year which is a cause of concern.
   4. The net interest margin stands at 2.95%.
   5. Deposits have grown to 65141 Cr from 57771 Cr last year.
   6. Out of these, retail term deposits count for 71.35% while savings deposits count for 21.66%.
   7. The cost of deposits has gone to 20 basis points to 5.96%.
   8. Number and value of transactions through mobile banking have gone up significantly.
   9. Well on its way on implementing KBL Vikaas program with BCG to transform operations.

Investor Conference Call Highlights

1. Interest income is up 13.67%.
2. Exposure to ILFS has been limited at Rs 155 Cr.
3. In SMA2, overall business grew by 14.67% with advances growing at 17.15%and deposits growing at 12.76%.
4. Operating profit per employee has been improved to Rs 13.58 Lac from Rs 12.21 Lac last year.
5. Business generated per employee has also grown to Rs 14.13 Cr from Rs 12.51 Cr last year.
6. Transformation exercise with BCG called KBL VIkaas is on way. As part of this, KBL has redesigned their housing and MSME loan delivery system.
7. As a result, housing loans sanctioned have gone up 50% YoY and fresh MSME loans santions have gone up 21% YoY.
8. KBL has also reduced their exposure to Universal Sompo to 8.7% from 14.9%.
9. Margins are expected to remain stable around 3% in the coming quarters.
10. MSME loan have gone up 12.16% YoY, housing loans have gone up 22.1% YoY, commercial real estate and mortgage loans have gone up 13.76% and car loans have grown 13.76% YoY.
11. The Capital Adequacy Ratio has improved to 11.98% in Q3 as compared to 11.30% in Q2 this year.
12. Management believes that they can comfortably bring the CAR up to 12.5% by March 2019.

Analyst’s View

Karnataka Bank has been one of the well-known regional banks in India. They have been differentiating themselves with their early adoption of technology and use of superior management practices which have resulted in their operating profit per employee rising year on year. The NPA situation, though, continues to be a challenge for the bank. Management guides for a better NPA situation for the coming quarters but as on date it looks very difficult.  Their business transformation initiative with BCG also seems to have yielded some improvements in loan sanctioning mechanism which has helped them keep costs low while significantly reducing sanction time taken. This should, in due course, help them become one of the consistent MSME lenders in the country and upgrade their brand from a regional bank to a national level bank. However, there are a few bumps along the way. Asset quality being one of the most critical ones. Let’s see in the coming quarters.

Disclaimer

This is not an investment advice. Please read our terms and conditions.