Karur Vysya Bank (KVB) has reported a moderate growth in both profits and topline for the first quarter ended June 2002. The growth pace of the bank slowed down in the first quarter on account of lower investment income and pressure on margins.
Income from operations
Net interest income
Operating Profit Margin (%)
Provisions and contingencies
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares (m)
Diluted Earnings per share*
The bank's core interest income from advances increased by 5% in the first quarter after having fallen by a similar percentage in FY02. Revival in credit demand in June quarter seems to have fueled the bank's loan growth and consequently interest income. The bank is likely to face challenging business conditions in the current year with scanty rains in Tamilnadu where large number of its branches are located. As a result, the bank may not be able to achieve its deposit target of Rs 50 bn, a growth of 20% in the current fiscal.
Interest income mix
Interest on advances
Income on investments
Interest on balance with RBI & others
On a YoY basis, the bank's operating margins dipped by over 90 basis points to 11.9% on the back of higher interest cost. OPM was however, marginally up from 11.8% in FY02. KVB continued striving for cost efficiencies which saw a further decline in cost to income ratio - 38% in 1QFY03 from 39% in the comparable quarter of the previous year. The bank has computerized 85% of its business and aims to increase the ratio to 95% in FY03. It has also taken core banking solution, 'Flexcube' from i-flex. Implementation of this software is expected to improve KVB's customers services and improve business productivity.
At the current market price of Rs 439, KVB is trading at a P/E of 3x and price to book value ratio of 0.6x. The bank has declared bonus issue in the ratio of 1:1 and also rights shares in the ratio of 1:1 at a premium of Rs 50 per share in the last Annual General Meeting. Over the last three months, the bank's stock has witnessed a good buying interest in expectation of increasing consolidation activity in the sector. Valuations would be re-rated once the bank's business growth increases and it make efforts to stand in line with its private sector peers. Moreover, the bank's asset quality is not a cause for concern.
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