KVB is one of the oldest private banks in India . It started its operation in 1916 in Karur ,Tamilnadu. The bank has recently completed its 100 Years of operations.Currently it has pan India presence (barring Northeast and J&K ) with a network of 675 branches .359 of which are located alone in Tamilnadu. The breakup of branch is as : -
The performance of the last few quarter is (Source - Value Research): -
The key takeaway from the latest quarterly result is : -
- Improvement in NIM,CASA
- Bank has low NPA when most of the banks are suffering from Asset Quality destress
- One of the best Provision coverage ratio in Indian banking industry
- Flat total Income
- Increase in the operating expense (Mainly due to Other expenses). I could not find the breakup of other expenses
Provisions has decreased as NPA decreased (YoY)
Now have a look at the Annual progress of KVB for last decades (Source KVB June 2016 Investor Presentation)
- The bank has made a good progress till 2013 -14 but from last two years banks revenue growth is stagnant (less)
- PAT growth is continuous
- Bank has enjoyed a very good NPM till 2010-11 . After that bank has rapidly done its branch expansion . I believe thats the reason for drop in NPM. Now the pace of branch expansion is slowed down , I believe it will improve its NPM again.
- The same branch expansion theory goes with RoA .
CMP - 478
Market Cap - 5829 Crs
Book Value - 387
TTM EPS - 47.54
P/E ~ 10
P/B ~ 1.27
Let me put some data from Valueresearch which shows the financials of last 5 years
The bank is available at very attractive valuation of P/E 10 and p/B of 1.27
It has one of the best asset quality in the indian banking industry (Ofcourse I am not talking about HDFC here ). Current NPA is .77 . While most of the banks are suffering from the NPA crisis , it has managed to reduce the NPA in recent time . It has one of the best provison coverage ratio .
Deposits and advances has started picking up from last FY . We can expect the good business growth going forward
Continuous improvement in NIMs,RoA . I consider RoA as the best metric to asses the efficiency of the financial institutes. Although RoA is not the best among industry ,I would say its lagging too much from the industry leader . But I believe the bank was in the expansion mode for few years and than followed by adverse economic condition (In last two years where other banks has focused on growth ,KVB focued on asset quality hence e could not achieve more income growth)
NPAs are declining and with the pick up of the economy it would further decline . Company is also shifting its focus from corporate to SME and Retail which would further help in reducing the NPA
The increased number of branch should start the revenue contribution
Recent declines in repo rate will reduce the cost of funds<img
Increase in CASA will reduce the cost of funds.
Dividend yield of 3 %
Increase in other income . In case of banks other income is commission brokerage,transaction fee etc . Its a good sign to have an increase in other income
Bank’s most of the business comes from the south india (Concentration of branch is almost 70 %)
Increase in the other expense . I could not find the breakup . If the increase is continuously growing at the same pace then it might eat up lot of profit.
References : -
InvestorPresentationJune2016.pdf (751.4 KB)
I hold KVB hence my views can be biased .