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    Karur Vysya Bank

    KARURVYSYAGood
    Financial Services·17 Oct 2025
    Management Summary

    Karur Vysya Bank delivered a strong Q2 FY26, hitting the INR 2 lakh crore business milestone while maintaining industry-leading ROA of 1.81%. The quarter was characterized by a strategic 'offset' where a massive INR 295 crore recovery from a written-off account allowed the bank to proactively recognize and provide for INR 218 crores of lumpy corporate slippages. Management remains confident in its full-year guidance, focusing on RAM vertical growth and margin preservation amid competitive pressures.

    Highlights

    8

    • Achieved a significant milestone of reaching INR 2,03,216 crores in total business, up 15% YoY.

    • Net Profit for the quarter stood at INR 574 crores, reflecting a growth of 17% YoY and 10% QoQ.

    • Net Interest Margin (NIM) maintained at 3.77%, despite a 9 bps sequential compression.

    • Return on Assets (ROA) reached 1.81%, exceeding the guided range of 1.55% to 1.65%.

    • Gross NPA slightly increased to 0.76% (from 0.66% QoQ) due to two lumpy corporate slippages totaling INR 218 crores.

    • Major recovery of INR 295 crores from a single technically written-off account (INR 157 cr principal, INR 139 cr interest).

    • CASA balances crossed the INR 30,000 crore mark, with total deposits growing 15% YoY to INR 1,10,492 crores.

    • Credit cost for the quarter was 0.27%, with management 'biting the bullet' on corporate stress early.

    Concerns

    1

    • Margin Compression

    Key financials

    Single quarter

    06 metrics
    1. 01Net Profit₹574 Cr+17%YoY
    2. 02NIM3.8%-2.3%QoQ
    3. 03ROA1.8%
    4. 04Gross NPA76%+15%QoQ
    5. 05Net NPA19%0%QoQ

    Segment breakdown

    Business MixQoQ Growth
    RAM Verticals (Retail, Agri, MSME)86%4%
    Corporate Banking14%—
    Retail Advances—7.0%
    Heatmap· 2 shared metrics

    Guidance & targets

    6
    CategoryTargetPriority
    Margin
    Net Interest Margin (NIM)
    3.7% to 3.75%
    		High
    Profitability
    Return on Assets (ROA)
    1.5% to 1.65%
    		High
    Volume
    Credit Growth
    2% above industry growth
    		Medium
    Other
    Gross NPA
    < 1.5%
    		High
    Other
    Slippage Ratio
    < 1%
    		High
    Other
    Annual Recovery Target
    INR 600 crores
    		Medium

    Risks & concerns

    3
    RiskSeverity

    Margin Compression

    NIM compressed 9 bps QoQ; management expects another 10 bps reduction in deposit costs but faces yield pressure from competition. — Both acknowledged

    high

    Lumpy Corporate Slippages

    Two accounts contributed INR 218 cr to slippages; management claims these were already in SMA 30-plus and no further lumpy stress is visible. — Analyst downplayed

    medium

    US Tariff Exposure

    Potential impact on textile exporters; management states exposure is miniscule and exporters are managing by absorbing small costs. — Analyst acknowledged

    low

    Q&A highlights

    3

    “we felt saying that it is better we bite the bullet earlier so that the realization will be better. So consciously a call is taken within the bank to upfront this one.”

    Explains the jump in GNPA as a proactive management decision rather than a systemic failure in the corporate book.

    asked by Akshat Agrawal, SMIFS Capital

    2 min read5 chapters

    Detailed Narrative

    01

    Milestone Achievement and Business Momentum

    Karur Vysya Bank achieved a significant milestone by crossing INR 2 lakh crore in total business, reaching INR 2,03,216 crores as of September 30, 2025. This represents a 15% YoY growth, driven by balanced increases in both advances (INR 92,724 crores) and deposits (INR 1,10,492 crores). The bank added INR 75,000 crores in business over the last 3.5 years, demonstrating consistent execution of its growth strategy.

    02

    Strategic Asset Quality Management

    The quarter featured a unique 'balancing act' in asset quality. A major recovery of INR 295 crores from a single written-off account provided a buffer that management used to proactively recognize INR 218 crores of slippages from two lumpy corporate accounts. While Gross NPA rose 10 bps to 0.76%, Net NPA remained steady at 0.19%, and management emphasized that excluding these two accounts, the corporate SMA 30-plus book is virtually zero.

    03

    Margin Sustainability Amidst Repricing

    NIM stood at 3.77%, a 9 bps sequential decline, which was better than the 19 bps decline seen in Q1. The cost of deposits reduced by 17 bps QoQ as the bank stopped certain special deposit schemes and reduced rates. However, management expects a 10 bps reduction in deposit costs next quarter and aims to maintain full-year NIM guidance of 3.7% to 3.75% by weeding out low-yielding corporate assets and focusing on high-yield RAM segments.

    04

    Liability Franchise and CASA Growth

    The bank's liability franchise remains a core strength, with CASA balances crossing the INR 30,000 crore mark. Total deposits grew 4% QoQ, supported by a 23% YoY growth in savings balances from New-to-Bank (NTB) customers. Retail deposits increased by 2% during the quarter, even as the bank reduced interest rates on special term deposit schemes to manage costs.

    05

    Segmental Performance and Future Outlook

    The RAM vertical continues to dominate the business mix at 86%, growing 19% YoY. Agriculture loans grew 4% QoQ, with agri-jewel loans making up 91% of that portfolio at a conservative LTV of 57.72%. Management is 'lying low' in highly competitive, low-yield segments like housing and vehicle loans, instead prioritizing risk-adjusted returns and maintaining a healthy CRAR of 16.58%.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.