analysis of financial results september 2012 meet/132652_20121017.pdf · •public issue of 45 lakh...

Analysis of Financial Results

September 2012

2

Table of Contents

Business Strategy

Financial Performance

Annexure

3

88 years banking history 1.

Pan-India footprint2.

Robust technology and risk management systems3.

Strong productivity, capital adequacy ratios4.

Experienced management team5.

4

• Incorporated in 1924, Karnataka Bank is one of the oldest time

tested private sector Banks

• Offers wide variety of corporate and retail banking products

and services to over 6.6 million customers

• Forayed into General Insurance business as a JV partner in

Universal Sompo General Insurance Company Limited

• Network of 510 branches and 409 ATMs in 334 centres

across India as on September 2012

• Business Turnover of ` 56,364 crores as of September 2012

Company Overview History and Evolution

1995

1977

1966

1961

1960 • Took over assets and liabilities of Sringeri Sharada Bank Ltd

• Took over assets and liabilities of the Chitaldurg Bank

• Took over assets and liabilities of Bank of Karnataka, Hubli and

opened 14 new branches

• Became an authorised dealer of foreign exchange

• Public issue of 45 lakh equity shares in October 1995

2000 • Implementation of “Finacle” CBS

2002• Launched multi-branch banking in 5 cities

• Bancassurance tie-up with MetLife

• Maiden bonus issue in the ratio of 1:1

2005 • Completed 2:1 rights issue to raise ` 160 crs

2006

• Floated general insurance JV along with Allahabad Bank, Indian

Overseas Bank, Dabur Investments and Sompo Japan Insurance

• Launched CDSL-DP services at select branches

1924• Incorporated on 18th February 1924 at Mangalore by Late B R

Vyasarayachar & other leading members of the South Kanara Region

2003 • Right issue in the ratio of 1:2

2007 • Completion of 100% core banking

2009 • Compliance with Basel-II norms

2010 • Maiden QIP aggregate ` 160.83 crs.

2012• Business Turnover crossed the milestone of ` 50,000 crore

• No. of branches also crossed 500

• Average turnover per branch is above ` 100 crore

2011• Bagged “Special Award for managing IT risks” instituted by IDRBT

• Right issue of ` 457.03 crore in the ratio of 2:5.

• Bagged “Best Banker in Customer Friendliness – Runner up”

• Bagged “Best Risk Mgmt & Security Initiative – 2nd runner up”

• Bagged “Best Financial Inclusion Initiative – 2nd runner up”

5

Creating pan-India footprintPan-India Presence Total 932 outlets – 10 regional offices, 510 branches,

3 Extension Counters & 409 ATMs

Specialized branches for Forex, Industrial, Agriculture,

MSME & Corporate finance business

Expanding network in northern India in the recent past

37

11

1

4

18

5

5

4

2

312

11

4

35

7

1

4

3

33

9

2

11

One of the strongest presence

in South India with

390+ branches

No of branches & ATMs

Area wise distribution of branches (Sept‟12)

485 503 510

409352

293

0

100

200

300

400

500

600

Sept'11 Mar '12 Sept'12

Branches ATMs

Metro

27%

Urban

31%Semi Urban

23%

Rural

19%

Top 5 States:

Karnataka (312), Andhra Pradesh (37),

Maharashtra (35), Tamilnadu (33),

Delhi (18)

6

Robust technology platform and risk management systems

Integrated risk management committee: Reviews quarterly risk profile and develops policies and

strategies for integrated risk management

Strong technology platform

Effective risk management system

100% networking of branches using CBS

Mandatory in-house credit risk rating for all loans exceeding INR 0.25 crore

Continuous offsite surveillance over borrower accounts

Pioneer in implementing “Finacle” (CBS) amongst the old generation private sector banks

IT strategy supports new business initiatives such as ATMs, International Debit Card, Internet

Banking, Online Trading, Gift Card, Travel Card, Biometric Smart Card under Financial Inclusion,

PoS Network, Mobile Banking, ASBA facility etc.,

7

Return and Capital Adequacy Ratios

14.87%12.64%

9.79%8.65%7.34%

0.0%

5.0%

10.0%

15.0%

20.0%

Sept'11 Dec '11 Mar '12 June '12 Sept'12

Return on Equity (%) (after tax) Return on Assets (%) (after tax)

0.56% 0.66% 0.73%0.90%

1.06%

0.0%

0.5%

1.0%

1.5%

Sept '11 Dec '11 Mar '12 June '12 Sept'12

Capital Adequacy (%) Basel II

10.3610.8610.81

1.811.982.04

12.8412.8512.17

0

2

4

6

8

10

12

14


Tier I Tier II

8

Productivity ratios

Operating Profit per employee (` lakhs) * Operating Profit per branch (` lakhs) *

128.5

101.492.3

0

20

40

60

80

100

120

140

Sept'11 Mar '12 sept'12

Business per employee (` crs)

9.28.68.0

0

2

4

6

8

10


Business per branch (` crs)

104.098.8

110.5

10

30

50

70

90

110

Sept'11 Mar '12 Sept '12

10.7

8.47.4

0

2

4

6

8

10

12


* annualised

9

Financial Performance

10

Income & ProfitNet Income (` crs)

510

224

328

201246

91

0

100

200

300

400

500

600


Operating profitNet profit

Operating and Net Profit (` crs)

Net Interest Margins (%)

455

732

333

182

346

164

1078

498

637

0

200

400

600

800

1,000

1,200


Other Income

Net Interest Income

2.40%2.40%2.19%2.10%2.06%

0%

1%

2%


Cost to Income Ratio (%)

48.54%46.75%52.69%

57.40%55.03%

0%

25%

50%

75%


(6 months) (6 months)(12 months)(6 months) (6 months)(12 months)

11

Deposits

Growth in Deposits (` crs)

Current

Account

5.9%

Purchase

liability

2.3%

Savings

Bank

17.6%

Retail Term

Deposits

74.2%

Deposits break up (September 2012)

7,9697,7636,744

21,355 22,693 25,206

7931,153750

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


CASA Retail Purchase liability

28,849 33,96831,608

12

Advances

Growth in Advances (` crs)

19,06720,721 22,395

946 1,4851,524

0

5,000

10,000

15,000

20,000


Advances Restructured loans

Segmentation of Advances (Sept‟ 2012)

Industries

(Mfg)

21.4%

* Agriculture

14.5%

Other

Personal

loans

10.2%Housing

8.5%

Others

29.8%

Services

15.6%

* However, this works out to 15.65% of the ANBC of 31.03.2012.

44.3%42.7%47.5% 52.5%55.7%57.3%

0%

25%

50%

75%

100%


Retail AdvancesCorporate Advances

Retail & Corporate Advances (%)

65.9%65.6%66.1%71.0%

79.0%

0%

25%

50%

75%

100%


CD Ratio Incremental CD Ratio

Credit Deposit ratio (%)

CD Ratio & Yield on Advances

12.91%12.56%12.15%

4.77%4.64%4.40%

0%

5%

10%

15%


Yield on advances Interest spread

Yield on Advances & Interest Spread (%)

113.6%

14

NPAs

Gross NPAs (` crs)

729685

777

3.27%4.01%

3.22%

0

250

500

750


0%

1%

2%

3%

4%

5%

6%

Gross NPA Gross NPA %

Net NPAs (` crs)

422

464

435

2.08%2.11%2.22%

0

150

300

450


0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

Net NPA Net NPA %

270

378

253

195

396

208

0

100

200

300

400


Fresh Accretions to NPA Stock

Recovery / Upgradation

Recoveries and fresh accretions (` crs)

(6 months) (6 months)(12 months)

15

Investments

Growth in Investments (` crs)

11,52812,841 14,042

0

5,000

10,000

15,000


Shares

1.2%

SLR

63.7%

RIDF

20.8%

Debenture

s, Bonds,

CD, MF

14.2%

Yield on Investments (excl. RIDF & MF) (%)

7.48%7.42%7.14%7.06%7.05%

0%

2%

4%

6%

8%


HFT

0.0%AFS

23.6%

HTM

76.4%

AFS HFT HTM TOTAL

2.44 - 3.70 3.39

Duration

16

Share holders‟ value

Dividend (%)136.99

128.39 137.98

0

50

100

150


Earning Per Share (`) *

13.07

9.66

21.30

0

5

10

15

20


Book value (`)

40%

30% 35%

0%

30%

60%

Mar '10 Mar '11 Mar '12

Indian Public

56.38%

FIIs

16.40%Others

2.26%

Banks, MF,

Insurance Cos

4.38%

NRIs/Ocs

0.52%

Private

Corporate

Bodies

20.06%

Share holding pattern (Sept‟2012)

* annualised

17

Business Strategy

“PROJECT TEJAS” – BPR project of KBL

18

The Bank has embarked on a “transformation journey” by

initiating “Business Process Reengineering” [BPR] called

“PROJECT TEJAS” and has engaged renowned

Management Consultants M/s KPMG Advisory Services for

the purpose. This initiative is aimed at high quality

growth across assets & liabilities portfolio and products &

services. Thus the Bank aims at doubling its business

turnover in the next 3 years.

Priorities Strategy Product support

Increasing

the share of

CASA

deposits

• Introduction of new SB &

Current account schemes

tailored to suit the various

market segments and

periodical overhauling of the

schemes with necessary

sophistication / upgradation.

• It is planned to acquire

1 million CASA clients during

current year.

• CASA campaign to have

focused attention.

Salaried Persons

KBL Salary Privilege

Students

KBL – Tarun

KBL – Kishore

Women

KBL –Vanitha

HNIs

KBL – SB Money Sapphire

KBL – SB Money Platinum

Businessmen/Corporates

KBL Current Accounts

General

Money Pearl

Money Ruby

Money Diamond

Money Platinum

Business Strategy

19

Priorities Strategy Products support

Credit in

Centre

Stage

To improve CD ratio

greater focus on Retail

Credit – Refined

Schematic products in

areas like Housing,

Trading, Consumer loans,

Gold loans etc.

thrust on Micro,

Manufacturing and

Service sector under

MSME lending.

Organisational set up

for effective credit

dispensation and

monitoring.

Agri Sector

KBL- Instant Agri Credit

KBL - Agri Gold

KBL - Krishik Pushpankur

MSME Sector

KBL- MSE (Traders, Professionals,

Transport Operators etc)

KBL- Contractor

Vyaapar Mithra

Housing

KBL- Apna Ghar

KBL- Ghar Niveshan

KBL - Mortgage

KBL - Lease N Cash

Consumption

KBL- Car Loan

KBL- Salaried Persons

KBL- Insta Cash

KBL - Easy Ride

Students

KBL- Vidyanidhi

Women

KBL- Mahila Udyog

Business Strategy

20

Priorities Strategy Product support

Augmenting

Fee Income

Leveraging the Clientele base to

enhance the “Other Income” by

Cross Selling / upselling.

Effective utilisation of „customer

segmentation‟ tool.

Concentrating more on acquirer

business in ATM channel

Appropriate counselling on

“Financial Planning” relevant for

various stages of one‟s life/life style.

Life Insurance products

General Insurance products

Mutual Fund products

Demat Services

Online Trading

POS Network

Gift Card

Travel Card

ASBA facility

Customer

Relationship

Management

Providing “Any Time,

Any Where Banking”

Retention/Acquisition of customer

through constant improvement in

the services rendered.

ATM facilities

Internet Banking facilities

Mobile Banking

Moneyplant Visa

International Debit Cards

E - Commerce Online

payment thro Debit Card

M – Commerce Payment

thro Mobile

Business Strategy

21

22

Annexure

23

Income & Expenditure

` crsMar-12(12 months)

Sept-11(6 months)

Sept-12(6 months)

Interest Income 3,101 1,445 1,839

Interest Expense 2,369 1,112 1,384

Net Interest Income 732 333 455

Fee Income 296 137 160

Treasury Income 50 27 22

Non-Interest Income 346 164 182

Total Income

(Net of Interest Expense)1,078 497 637

Operating Expenses 568 274 309

Operating Profit 510 224 328

Provision for Taxes / loan losses

in Adv. / losses in Invts. / other264 133 127

Net Profit 246 91 20123

24

` crsMar-12(12 months)

Sept-11(6 months)

Sept-12(6 months)

Interest Income

Interest Income 3,101 1,445 1,839

Interest on Advances 2,362 1,093 1,376

Interest on Investments 736 348 452

Other interest 3 4 11

Yield on Advances 12.56% 12.15% 12.91%

Adjusted yield on Invts. 6.18% 6.11% 7.19%

Interest Expense

Interest Expense 2,369 1,112 1,384

Interest on Deposits 2,269 1,064 1,323

Other interest 100 48 61

Cost of Deposits 7.92% 7.75% 8.14%

Net Interest Income

Net Interest Income 732 333 455

Interest Spread in Lending 4.64% 4.40% 4.77%

Net Interest Margin on average assets 2.19% 2.06% 2.40%

Interest Income & Interest Expenditure

24

25

Capital Adequacy

` crs Sept-11 Mar-12 Sept-12

Total Risk Weighted Assets – Basel I 23,922 25,502 27,153

Total Risk Weighted Assets – Basel II 22,358 23,743 24,894

Total Capital Fund 2,873 3,049 3,030

Total Tier I Capital 2,416 2,579 2,579

Paid up Equity Capital 188 188 188

Reserves under Tier I Cap. 2,228 2,391 2,391

Total Tier II Capital 457 470 451

Surplus Provisions & Reserves 107 120 125

Subordinated Debt Fund 350 350 326

CRAR under Basel I 12.01% 11.95% 11.16%

CRAR Tier I Capital 10.10% 10.11% 9.50%

CRAR Tier II Capital 1.91% 1.84% 1.66%

CRAR under Basel II 12.85% 12.84% 12.17%

CRAR Tier I Capital 10.81% 10.86% 10.36%

CRAR Tier II Capital 2.04% 1.98% 1.81%

Present Management Team

Top Management

Board of Directors

R V Shastri

Bangalore

Former Chairman and

Managing Director,

Canara Bank

U R Bhat

Mumbai

Investment Adviser &

Columnist

T S Vishwanath

New Delhi

Chartered Accountant

Former President, ICAI

Sitarama Murthy M

Hyderabad

Former Managing

Director, State Bank

of Mysore

D Harshendra Kumar

Shri Kshethra

Dharmastala,

Dakshina Kannada

Dr. H Rama Mohan

Kundapura

Medical Practitioner

S V Manjunath

Chikmagalur

Planter

Ananthakrishna

Chairman

P Jayarama Bhat

Managing Director & CEO

T R Chandrasekaran

Chennai

Chartered Accountant

26

Ashok Haranahalli

Bangalore

Advocate

Disclaimer

This presentation has been prepared by Karnataka Bank (the “Bank”) solely for providing information about the Bank. This presentation is confidential and may

not be copied or disseminated, in whole or part, in any manner. This presentation has been prepared by the Bank based on information and data which the Bank

considers reliable, but the Bank makes no representation or warranty or undertaking, express or implied, whatsoever, and no reliance shall be placed on, the

truth, accuracy, completeness, fairness, correctness and reasonableness of the contents of this presentation. This presentation has not been approved and will

not be reviewed or approved by any statutory or regulatory authority in India or by any Stock Exchange in India and may not comply with all the disclosure

requirements prescribed thereof. This presentation may not be all inclusive and may not contain all of the information that you may consider material. No part

of it should form the basis of or be relied upon in connection with any investment decision or any contract or commitment to purchase or subscribe for any securities.

Any liability in respect of the contents of, or any omission from, this presentation is expressly excluded. No representation or warranty, express or implied is

made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of such information or opinions contained herein. Neither

the Bank nor any of its respective affiliates, advisers or representatives, shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever

arising from any use of this presentation or its contents or otherwise arising in connection with this presentation. The information contained in this presentation

is only current as of its date. Certain statements made in this presentation may not be based on historical information or facts and may be “forward-looking

statements”, including those relating to the Bank’s general business plans and strategy, its future financial condition and growth prospects, and future

developments in its industry and its competitive and regulatory environment. Actual results may differ from these forward-looking statements due to a number

of factors, including future changes or developments in the Bank’s business, its competitive environment, information technology and political, economic, legal

and social conditions in India and worldwide. Further, past performance is not necessarily indicative of future results. Given these risks, uncertainties and other

factors, viewers of this presentation are cautioned not to place undue reliance on these forward-looking statements. The Bank disclaims no obligation to update

forward looking statements to reflect events or circumstances after the date thereof. This presentation is for general information purposes only, without regard to

any specific objectives, financial situations or informational needs of any particular person. This presentation and any information presented herein are not

intended to be, offers to sell or solicitation of offers to buy the Bank’s equity shares or any of its other securities and shall not constitute an offer, solicitation or

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Securities Act 1993, as amended (the Securities Act”) or any securities laws in the United States and, as such, may not be offered or sold in the United States or

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means of a prospectus and private placement memorandum which contained detailed information about the Bank and its management, as well as financial

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analysis of financial results september 2012 meet/132652_20121017.pdf · •public issue of 45 lakh...

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