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Karur Vysya Bank

Financial result for Q3/ 9 Months ended 31st Dec 2018 :

Attended Q2FY20 Investor call today (but got disconnected after 60 min for some reason).

Q2FY20 results : https://www.bseindia.com/xml-data/corpfiling/AttachLive/D02163BE_73BB_452E_B3F3_3DB1591F6534_125352.pdf

Updates from results, concall discussions :

Income - 8 YoY

PAT - 63Cr (down 24% YoY)

Deposits - 7 YoY

Gross Advances - 3%

GNPA - 8.89% (down by 28 bps from Q1)

NPA - 4.5% (down by 44 bps from Q1)
PCR - 61.8% (up by 2)

Incremental provisioning not required anymore. Improvement in situation of SMA1, SMA2 book.
Slippages increased from 474cr to 549cr. Mgmt said there has been good number of recoveries so net net remains same.
There is high liquidity within, which affected margins. Increase in retail book soon should offset this in coming quarters.
Business Updates :

  1. Total Branches - 779

  2. Focus will be in South & Western states from now on + Delhi. All branches are being trained for the retail push.

  3. KVB is undergoing huge changes in their business model. From a corporate oriented bank, bank is moving towards retail focussed & small business commercial bank. In order to facilitate the change, bank has undergone series of changes & improvements:

A) Branch level changes in Business model, old vs new:

B) Distribution reach increase through Coorigination platform (NEO Gateway API) : KVB have been extensively working on a technology platform for integration to other financial institutions and products so that their distribution channels are now increased. This Co-origination platform is live with 4 live relationships. As an example, Mgmt described tie up with ‘Home Credit India (HCIN)’ (part of Home Credit group a global MNC). HCIN has a balance sheet of 7000 cr and does Consumer Finance. Mgmt explained that platform is very powerful in the sense that the time to market for such relationship in NEO platform, is less than a month. KVB will process loans through an app-based, end-to-end paperless solution. This partnership will help KVB leverage HCIN’s large user database and reach out to a segment which they have not pursued aggressively in the past. This is a joint lending. HCIN and KVB will disburse the loan as a single amount to the customer. HCIN gets exposure of KVB’s low cost of funds. KVB will be able to cross sell other banking products as well to these customers. Mgmt claimed that processing , underwriting is digitised & can be done within 60seconds. First loan went through in July and they are currently in pilot phase, but they have already done 140 Cr worth loans through the integration.

KVB has also tied up a similar distribution deal with ICICI Lombard,so insurer could sell insurance to KVB’s customer. Management also looking to tie up with Microfinance partners.

  1. KVB is now retail focused. Mgmt claims they have deliberately not increasing Corporate book. Degrading corporate, large ticket corporate loans. Corporate 27% retail 24%. Advances are flat. Liquidity is more.

  2. Retail grew 20%. Focus is on distribution setup to improve retail. Partnerships with HCIN, ICICI Lombard is a start.Small ticket commercial & retail will increase

  3. Agriculture loan provided will be more on Gold collateral. This will increase Gold loans. Digital jewel loan roll-out continuing.

  4. Small Business loans are grew 85% QoQ. This is also digital app loan process.

  5. App transactions increasing nearly 50% QoQ since start of FY.

  6. Bullion business to start from Q4 FY 20

10)Guidance - Retail Run rate in Q3 is positive , momentum strong. Overall, management wants to be conservative. A Growth 10% YoY is possible for the year.

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If all the banks are going to focus on retail lending, i wonder who will lend corporate companies?
KVB had a policy of not issuing credit cards. Now, they have started to issue credit cards in partnership with SBI.
With new management, the company seems to be moving away from some of its core principles.

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They are not going completely retail though. They still say they will do retail & small business loans which is their core strength. Its a good thing IMO. KVB has suffered with NPAs for a while …atleast now with retail & small ticket business loans, they have a tight leash on NPAs. Their market is rural which is largely untapped in retail side

Now the bank is focussing on gold loan and they have disbursed approx Rs 10000 cr as gold loan .Gold loans are considered totally safe . I expect the bank to now perform better.

Investor Presentation on the Un-audited Financial Results of the Bank for the Quarter and Nine Months ended 31st December 2020

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Concall highlights

Business

Bank has formulated three year strategy to reach 1% ROA by FY24.

Growth - retail loan grew 9.5%YoY and are now completely sourced digitally. Stopped unsecured loans for time being. Rural loans doing well - LTV of 75% to manage price risk.
Commercial - strategic priority - most profitable segments. Overall bank expect credit growth of 12% in FY22. Open to organic and in-organic growth opportunities.

Bank took full wage revision impact by 3QFY21. In the 4Q, bank reversed provisions of INR620mn from provisioning line to employee cost line; impact was P&L neutral. Bank expects steady state run-rate of INR2.6bn per quarter for employee cost. 90% of employee under IBA. Bank has completely stopped IBA recruitment.

Bank has 54% branches in semi-rural and urban areas.

Home loan book - self-employed is 70% and salaried is 30% ? Commercial book yield at 10.5% with collateral cover of 1.3x.

Steady state tax rate of 25%.

Commenced credit monitoring department under leadership of GM to increase recoveries from Two pool Asset Quality ? Collection efficiency >90% in 4QFY21 and April. Bank expect drop in May.

Core slippages for the quarter were 740mn. FY21 Gross slippages were INR9.6bn and net slippages were INR5.27bn.

Restructuring stands at INR9.6bn (1.9% of loans). Restructuring 2.0 will have better quality customer.

Provisions - fully utilized covid buffer, covid buffer stands NIL. Bank has also made provisions of INR590mn towards stressed assets of which INR480mn was towards SR.

SMA 30+ is 1.7%.

PCR - ideal working towards 60%.

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I could not find the March shareholding pattern. Why it is not publish on BSE?