Karur Vysya Bank: Q4FY14 Result Analysis

Karur Vysya Bank (KVB), a south-based private sector bank posted healthy set of numbers for the fourth quarter and year ended 31 March, 2014. The total interest earned of the bank grew by 17.5% on yearly basis to Rs 1323 crore in Q4FY14 against Rs 1126 crore in the same period last year. The growth was primarily driven by retail banking segment which went up by 16% to Rs 740 crore during the said period.

KVB's net interest income (NII) went up by 12.3% on yearly basis and stood at Rs 348 crore in Q4FY14 as against Rs 310 crore in Q4FY13. However, operating profit of the bank went down by 12.7% to Rs 209 crore during the said period against Rs 240 crore in Q4FY13 on account of drop in other income and increase in employee cost. Other income of the bank slipped by 8% to Rs 146 crore in Q4FY14 against Rs 158 crore in the same period last year. The employee cost of the bank surged by 48% to Rs 148 crore in Q4FY14.

The bottomline of the bank recorded sharp decrease in numbers and fell by 24.6% to Rs 120 crore during the said period against Rs 158 crore in Q4FY13 on account of higher provisioning done by the bank. Provisions & contingencies increased by 24% to Rs 110 crore in Q4FY14 against Rs 88 crore in the same period last year.

As far as the other performance parameters of the bank is concerned, the capital adequacy ratio of the bank under basel III stood at 12.6% in Q4FY14. However return on assets of the bank recorded sharp decrease during the said quarter and came down to 0.93% against 1.44% in Q4FY13.

On the asset quality front, the bank showed a considerable improvement during the said period. Gross non performing asset ratio of the bank came down drastically to 0.82% of total lending in Q4FY14 where it was 1.47% in Q3FY14. Further net NPA ratio also showed improvement and stood at 0.41% of net lending of the bank in Q4FY14 against 0.48% in same period last year. In absolute terms, gross NPAs dropped by 42% to Rs 279.2 crore in Q4FY14 against Rs 485 crore in Q3FY14 while net NPAs came down by 11.5% on Q-o-Q basis to Rs 140 crore in Q4FY14. However provisions & contingencies of the bank surged by 117% on Q-o-Q basis to Rs 110 crore in Q4FY14 against Rs 51 crore in Q3FY14.

Coming to the performance for FY14, the total interest earned of the bank grew by 21% to Rs 5116 crore in FY14 against Rs 4242 crore in last fiscal year. Further other income went up by 25% on yearly basis and stood at Rs 564 crore in FY14 against Rs 453 crore in FY13. However operating profit of the bank recorded marginal decline during the year and stood at Rs 838 crore in FY14 against Rs 848 crore in last fiscal year. The bottomline of the bank also declined and fell by 22% to Rs 430 crore in the said period against Rs 550 crore in FY13 on account of higher provision which went up by 258% to Rs 442 crore in FY14.

At CMP of Rs 443.10 per share, the stock is trading at 1.40x of its book value.