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Nirmal Bang Report
We recently hosted the management of Karnataka Bank Ltd. as part of our week-long investor conference. The management is confident about the overall business environment in terms of credit growth and deposit growth. Also, it does not envisage any major slippages going forward and expects the same to be on a downward trajectory.
Moreover, the return on asset on a sustainable basis is likely to be in the range of 1.14% to 1.25% going forward.
Management Meet Key Takeaways -
On business growth
Focus will be on growing agri loans, contractor loans, gold loans, auto loans and home loans.
The bank has already automated the underwriting process for retail loans. The micro small and medium enterprise portfolio is also faring well and will be in focus going forward.
Home loans comprise ~16% of the book. In the housing segment, focus is on the premium segment as well as the affordable housing segment.
Overall, the management expects credit growth to be ~15% going forward.
Asset quality
The management highlighted that all the negative surprises on slippages are largely over.
Karnataka Bank has been doing some stress asset identification and has also been in an accelerated provision mode.
The management indicated that it would take almost a year for the draft on expected credit loss and another year for the final guidelines to be released; it expects the process to be completed within three years.
The management expects gross/net non performing asset to be below 3.0%/1.5% going forward.
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