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Nirmal Bang Report
We interacted with the management of Karur Vysya Bank Ltd. in order to understand its business transformation journey, which started in 2018 through digitalisation of its processes, asset quality clean-up and verticalization strategy, the impact of which is visible on its financial metrics.
The setting up of LOS across its retail, small and medium enterprise and corporate verticals five years back led to improved special mention account numbers and more time for branch staff for getting more leads.
From traditionally a corporate/SME focused bank, Karur Vysya Bank is now transforming into a multi-distribution channel led SME/retail focused bank.
Besides success of its DST channel NEO and collaboration with BCs and DSAs, the bank also has co-lending tie-ups with Cholamandalam for construction equipment loans, IIFL Finance for Gold Loans, Amazon (Axio) for BNPL and other tie-ups with fintechs.
Karur Vysya Bank has created separate verticals for stressed asset monitoring, small business group, business banking group and deposit mobilisation. It has worked on granularising its corporate portfolio, focusing on ticket sizes of below Rs 1 billion.
The bank has maintained its net interest margin guidance for Q4 FY24 at 3.8% and thereafter it is expected to remain at its historic long-term range of 3.75-3.8%. Its return on asset guidance for FY24 is 1.6% after considering double-digit loan growth, healthy margins and benign credit costs.
In the long term, it expects RoA to be ~1.5%. Karur Vysya Bank is trading at 1.5 times its trailing adjusted book value of Rs 110.10.
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Also Read: Archean Chemical - Robust Long-Term Growth Outlook: Axis Securities Initiates Coverage With A 'Buy'
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