Karur Vysya Bank Financials 2021-22

 Karur Vysya Bank's Impressive Financials ( 2021-22)

Karur Vysya Bank (KVB), a reputed bank of 106 years of age and also referred to as a old generation private sector bank, released its financial results for 2021-22. The results are impressive.  Details of presentation is available in the link https://www.kvb.co.in/docs/investor-presentation-2022-05-20.pdf

This is the second audited annual financial results, after Shri B. Ramesh Babu assumed charge as MD & CEO of the bank in July 2019.

Salient Features are:

1. 87% jump in net profit to record Rs.673 cr., which incidentally is the highest net profit in KVB history. 

2. Increase in NII by 15% YoY, reduction in employee expenses by 18% YoY enabled the bank to compensate the decline of 15% YoY in other income  and still post a healthy operating profit of Rs.1630 cr. as on 31.03.2022. (26% growth YoY). But what sealed the huge growth of 87% over the FY2020-21 was that the bank could maintain the provision amount for NPAs  around the same level made in previous year. (Rs.724 cr. for 2021-22 versus 719 cr. for 2020-21)

3. Slippages was contained at around 1.4% and recoveries almost equalled the fresh slippages. (Rs.723 cr. recoveries/upgradation versus Rs.843 cr. fresh slippages)

4. The business levels, which crossed the milestone of  Rs.1,25,000 cr. during 2021-22, have grown by nearly 20% in the last 2 years (19500 cr.) with both advances and deposits growing around 9000 cr. each. Creditable indeed is the performance during the intense COVID and Post COVID impact on the economy. 

5. The untapped potential under gold loan was fully exploited in the last two years, which is now at 25% of the total advances of the bank. It helped in better returns, virtually negligible NPAs - fully recoverable and as they are 100% eligible cash collateral CAR remained unaffected due to this exposure.

6. Proposed Dividend of 80% is the highest in the last 5 years.

Strengths of the Bank:

1. Of the total advances, bank has an exposure of 32% under commercial credit (exposure less than Rs.25 cr.), 23% each under retail and agriculture. This suits the bank well as it has a predominant presence in semi-urban (38%) followed by urban and rural branches. (75% of total branches) 

2.73% of bank's total exposure are for loans less than Rs.5 cr. 

3. 87% of fund and non-fund based exposure (totalling Rs.65711 cr.) are backed by at least 50% collateral security ( 67% of  fully secured) 

4. CAR is impressive at 19.46% with Tier I alone accounting for 17.49%

5. 35% of total deposits of Rs.68676 cr. come from CASA and 92% of its term deposits are retail with individual outstanding less than Rs.5 cr.

In my view, the challenges are:

a. Though GNPA has come down to 5.96% (from a level of 6.56 in March 2021), Corporate NPAs are at 12% and commercial NPAs are at 7% of their respective portfolios. This should be brought down.

b. Monitoring continuously the Restructured standard assets, which stands at 2.85% (Rs.1640 cr.) so as to avoid delinquencies.

c. Improving Current Account share beyond the present 10% in Total Deposits. This is an area untapped, considering the number of units in MSME sector particularly the trade sector, enjoying credit limits with the bank. 

d. Improving the yield in investment portfolio staggering around 5.4% for the last two years.

e. Bringing market value of the bank's share to somewhere near the book value. (market price hovering around Rs.50 against its book value of Rs.94 per share). This is needed as any effort to raise money thro FPO is to be made in future. (The share was trading in 120-140 range two-three years back). While the bank cannot do anything on the price of share in the market in which it has no control, positive results like the net profit , improved RoE and RoA as a consequence in the FY2021-22, good business growth & containment of NPAs in 2022-23 as well may play a positive effect on the market price. 

Regards 

V. Viswanathan

21st May 2022


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