Karur Vysya Bank - NIMs Expand, Stress At Elevated Levels; Result Update Q3FY15:: Edelweiss

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->

Karur Vysya Bank’s (KVB) Q3FY15 PAT of INR 114 cr (up 7% YoY) was inline with our estimate following 52bps NIMs expansion led by lower cost of funds. Key highlights were: 1) Core NII growth was healthy at 28% YoY largely led by NIMS expansion of  41bps YoY due to compression in cost of funds by 32bps YoY 2) Loan growth remain muted reporting growth of 8% YoY 3) Slippages were high at INR 230cr (2.7% vs 1.8% in Q2FY15); GNPAs increased to 1.9% vs 1.4% QoQ, with calculated coverage maintained at 75%. Restructuring was marginally higher QoQ at INR 78cr (4.7% of advances) 3) Cost/income ratio in decreased by 510bps to 51% QoQ owing to lower opex growth (up 3.5% YoY).

Loan growth muted, NIMs expand

KVB’s advances growth was muted in Q3FY15, expanding by 8% YoY and 0.6% QoQ to INR 35,746 cr. Although loan growth was more broad-based and across segments, traction was higher in Corporate and Retail segments. Deposits growth too was flat (up 3.2% YoY and 0.6% QoQ to INR 45,116 cr). CD ratio remained stable QoQ at 79%.  CASA deposits remained flat QoQ at 21.5%. NIMs expanded by 41bps to 3.08% on QoQ basis largely on account of lower cost of funds QoQ. The cost of funds decreased by 32bps to 8% QoQ and the yield on funds remained flat QoQ at 10.4%. Core net interest income (NII) growth was healthy at 16% YoY. Going forward, we expect NIMs to remain in the range of 2.7% to 2.9%.

Slippages higher, marginal rise in restructuring

KVB’s Q3FY15 GNPAs increased QoQ to 1.9% vs 1.4% and NNPAs increased QoQ to 0.73% vs 0.6%. Slippages were higher at INR 230cr (2.7% vs 1.8% slippage in Q2). However, lower recoveries/upgrades at INR 30 cr pushed GNPLs to INR 680 cr (up 40% QoQ). There was fresh restructuring of INR 78 cr, taking the restructured pool to 4.7% of advances. Going forward, the management believes that there is no major pipeline of NPAs and therefore the asset quality should stabilize.  The provisioning coverage ratio (PCR) stands comfortable at 75%.

LINK

https://www.edelweiss.in/research/Karur-Vysya-Bank--NIMs-Expand,-Stress-At-Elevated-Levels;-Result-Update-Q3FY15/10005540.html