Karnataka Bank Q1 Results Review - Healthy Quarter, Growth Momentum Gaining Traction: Axis Securities

Axis Securities Report

Operational Performance:

Karnataka Bank Ltd. reported a healthy advances growth of 18/3% YoY/QoQ, led by strong growth in the corporate segment (+29/4% YoY/QoQ) and a gradual pick-up in the retail segment (+11/4% YoY/QoQ).

Deposit growth stood at 15/2% YoY/QoQ, mainly led by term-deposits (+18/4% YoY/QoQ), while current account and savings account deposits de-grew by 2% QoQ. CASA ratio stood at 30.5% versus 32.0% YoY/QoQ. C-D ratio stood at 73.8% versus 70.7/72.9% YoY/QoQ.

Financial Performance:

Net interest income grew by 11/8% YoY/QoQ led by healthy growth and a 24 bps QoQ improvement in NIMs, which stood at 3.54% versus 3.3% QoQ. Non-interest income de-grew sharply by 14/33% YoY/QoQ owing to slower fee income growth and lower recoveries from w/off accounts.

Opex growth decelerated and de-grew by 17% QoQ resulting in a cost-income ratio improvement to 52.8% versus 60.1% QoQ. Pre-provision operating profit growth was healthy at 12% QoQ. Provisions were significantly lower (credit costs at 22 bps) versus our expectations resulting in a strong beat on our earnings estimates.

PAT grew by 8/46% YoY/QoQ. Asset quality remained steady, with gross non-performing asset and net non-performing asset holding firm at 3.5% and 1.7%, respectively, flat QoQ. Slippages were well controlled, with a slippage ratio of ~2.3% compared to 3% QoQ.

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