Karur Vysya Bank: Profits Dip in Q3FY13

Karur Vysya Bank (KVB), a south-based private sector bank announced its result today (Feb 1, 2013) for the quarter ended Dec 2012. 

The fall in the profit has been observed despite the Net Interest Income (NII) witnessing an increase of 31% on a yearly basis to Rs 308.44 crore. The two factors that led to such a decline in the profit was an increase in the operating expenses and provisions, other than tax and contingencies. The operating expenses for the Dec 2012 quarter was Rs 201.94 crore against Rs 134.38 crore in the quarter ending Dec 2011, increasing by 50%. Provisions in the same period, too, saw an increase of 81% to Rs 65 crore. 

In terms of segmental revenue, it is the corporate banking division, which is a quarter of the total business done by the bank that saw a mere increase of 1% in the revenue, whereas the profit from this segment saw a fall of 17%. Retail segment, which forms half of the bank’s operations, remained strong and saw its sales and profit increasing by 40% and 14% respectively.

In terms of asset quality, the bank has given mixed results. While its Gross NPA saw a decline of 16 basis points to 1.29%, its Net NPA has increased by 9 basis points to 0.38%. The bank’s capital adequacy ratio stands at 13.36% at the end of Q3FY13, up by 11 basis points.

Post its result, the bank saw a sharp drop in its share prices (fell by 2%) and is currently trading at Rs 518.9, which is around two times its book value. The valuation of the bank looks a bit on the expensive side and hence, we advise our readers to enter the stock only once it goes below Rs 500.