Karur Vysya Bank Limited — Q1 FY27 earnings call

Call held 24 Jul 2026

Management summary

Karur Vysya Bank reported a strong Q1 FY27 with robust business growth, improved NIM, and stable asset quality. While operating profit and non-interest income saw sequential declines due to one-off factors and lower recoveries, net profit grew significantly year-on-year. The bank maintained its cautious growth outlook, focusing on portfolio quality and strengthening its deposit franchise amidst an evolving operating environment.

Highlights

  • Total business grew 6% QoQ and 16% YoY to INR 2,27,267 crores, driven by balanced growth in advances and deposits.

  • Net Interest Margin (NIM) improved to 4.26%, 1 bps higher than the previous quarter, despite repo rate cuts.

  • Net Profit increased 45% YoY and 4% QoQ to INR 756 crores.

  • Asset quality remained strong with Gross NPA at 0.74% and Net NPA at 0.19%, with slippages at 0.13% annualized.

  • Retail assets grew 23% YoY, with jewel loans up 12% and mortgage loans up 9% QoQ.

Concerns

  • Operating profit declined 12% sequentially to INR 1,096 crores, attributed to one-off items and higher opex due to AS 15.

  • Non-interest income was down 28% sequentially to INR 442 crores, primarily due to lower core fee income and write-off recoveries.

  • Cost of deposits increased slightly by 4 basis points sequentially, with management expecting a further 5-10 bps increase next quarter.

Key financials

  1. Total Business ₹2.27L Cr +16%YoY
  2. Advances ₹1.05L Cr +6%QoQ
  3. Deposits ₹1.23L Cr +6%QoQ
  4. Net Interest Margin (NIM) 4.3%
  5. Operating Profit ₹1,096 Cr +36%YoY
  6. Net Profit ₹756 Cr +45%YoY
  7. Gross NPA 0.74%
  8. Net NPA 0.19%
  9. ROA 2.1%
  10. CRAR Basel III 18.6%

What they filed

Q1 FY27: revenue up 18.7%, net profit up 45.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue2,387 2,489 2,516 2,569 2,808 +18%2,794 +12%2,904 +15%3,049 +19%
Net profit474 496 513 521 574 +21%690 +39%725 +41%756 +45%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Liquidity Liquidity disclosed Liquidity Coverage Ratio (LCR) for the quarter is at 123.61%, with a target to maintain it in the range of 115% to 120%.
    Our liquidity coverage ratio for the quarter is at 123.61%, and we would maintain this in the range of 115% to 120%.

Guidance & targets

Credit Growth

  • Overall Credit Growth Credit Growth · rest of the quarters · High confidence 1% or 2% over industry growth
    To sum up, our guidance for credit growth of 1% or 2% over the industry growth will continue for the rest of the quarters.

    — B. Ramesh Babu

Profitability

  • NIM Profitability · full year financial year '26-'27 · High confidence 3.7% to 3.8%
    NIMs for the full year will be in the range of 3.7% to 3.8%.

    — B. Ramesh Babu

  • NIM Profitability · next quarter · Medium confidence 4% plus
    With the current visibility, NIM may remain at the levels of 4% plus in the next quarter.

    — B. Ramesh Babu

Asset Quality

  • GNPA Asset Quality · full year · High confidence less than 1.5%
    Our GNPA is expected to be less than 1.5%.

    — B. Ramesh Babu

  • Net NPA Asset Quality · full year · High confidence less than 1%
    Net NPA will be less than 1%.

    — B. Ramesh Babu

  • Slippages Asset Quality · full year · High confidence less than 1%
    slippages to be less than 1% of our loan book.

    — B. Ramesh Babu

Branch Expansion

  • New Branches Branch Expansion · first half of the year · Medium confidence 50 branches
    We opened two branches during the first quarter. So though we have planned for opening 50 branches during the first half of the year, so we will be completing 25 branches before the end of this quarter and the balance before the end...

    — B. Ramesh Babu

Liquidity

  • LCR Liquidity · ongoing · High confidence 115% to 120%
    Our liquidity coverage ratio for the quarter is at 123.61%, and we would maintain this in the range of 115% to 120%.

    — B. Ramesh Babu

Cost Efficiency

  • Cost-to-Income Ratio Cost Efficiency · ongoing · Medium confidence 40% to 45%
    So that way, even if these things are there, it may not cross our 45% to 50% usually the bracket what we indicate for the cost-to-income ratio, 41.74 may become 42.5 or 43, something like that.

    — B. Ramesh Babu

Gold Loan Portfolio

  • Gold Loan Share of Advances Gold Loan Portfolio · ongoing · Medium confidence 30% to 35% of overall portfolio or 32% of overall advances
    So, above all, the growth numbers when you ask, so we have earlier indicated saying that our internal indication is between 30% to 35% of the overall portfolio or 32%, if you can say, of the overall advances gold loan can be.

    — B. Ramesh Babu

Deposits

  • FCNR (B) Deposit Mobilization Deposits · ongoing · Medium confidence double or triple current base of USD 130 million
    we will see our current base before this launch of the scheme is around USD130 million under FCNR. So we will try to either double it or triple it what all is possible...

    — B. Ramesh Babu

What to watch in Q2 FY27

NIM trajectory

next quarter
Current 4.26%
Target 4% plus

Why it matters

NIM is a key profitability driver, and management indicated a review of full-year guidance after Q2.

With the current visibility, NIM may remain at the levels of 4% plus in the next quarter. However, we are not changing the full year guidance, which would be reviewed at the end of September.

Risks & concerns

  • Evolving operating environment

    medium

    Management emphasized the need to navigate the evolving operating environment carefully while ensuring growth without compromising portfolio quality.

    Management acknowledged

  • Pricing competition and customer retention impacting yields

    medium

    Competition and customer retention may bring down yields, necessitating compromise on margins for fresh business and existing customers.

    Management acknowledged

  • Variability in write-off recoveries

    medium

    Write-off recoveries are not uniform due to external factors and legal issues, leading to fluctuations quarter-on-quarter.

    Management acknowledged

  • Potential increase in cost of deposits

    medium

    Cost of deposits increased by 4 bps sequentially, and management expects a further 5-10 bps increase next quarter due to repricing.

    Management acknowledged

  • Impact of overall conflict on SME/Corporate segments

    medium

    Analyst raised concerns about the impact of geopolitical conflicts on SME/Corporate. Management identified textile, ceramics, and logistics as potentially affected but noted prior provisioning (INR 163 crores) and no current stress in SMA numbers or working capital utilization.

    Analyst acknowledged

  • El Nino impact on agriculture gold loans

    low

    Analyst asked about El Nino's impact on gold loans. Management stated the portfolio is insulated due to sentimental value, gold backing, and conservative LTVs (less than 65%), with 92% of the agriculture portfolio backed by gold.

    Analyst downplayed

Q&A highlights

7 direct
Credit growth guidance vs. system growth Direct
No, Jai. Thank you for the compliments, agree. So Jai agree because our intention is 1% to 2%, we thought, but system has moved much early. Now we need to look at the texture of the growth of the system. Suppose if the system is growing more in the corporate because earlier, corporates are moving towards the fixed income, that is treasury NCDs and all.

Analyst sought clarification on whether the bank's 1-2% above system growth guidance would be maintained given the system's accelerated growth, and management clarified their cautious approach to corporate growth to avoid past mistakes.

Asked by Jai Mundhra

SME loan growth trajectory Direct
Good question, Jai. In fact, you see, last quarter, you would have observed our growth was flat in our commercial segment. The reasons were many because we didn't want to grow in the last last few days. And second thing, there was a pricing competition also there. We didn't want to be there in that race. So now that, that is over, first quarter is again the normal that way, we have gone for that.

Analyst questioned the slowdown in SME YoY growth, and management explained it was a conscious decision in the previous quarter due to pricing competition, indicating a return to normal growth.

Asked by Jai Mundhra

ECLGS disbursement status Direct
Yes. Jai, under ECLGS in commercial segment, 2,232 customers have applied till now. Now we are screening the applications. And till now during Q2, INR140 crores has been disbursed. Now under corporate, similarly, we found that 176 units are eligible and we have disbursed till now 6 only, but to the tune of INR80 crores in everything in Q2.

Analyst inquired about ECLGS disbursements, and management provided specific numbers for applications and disbursements in both commercial and corporate segments, indicating ongoing screening.

Asked by Jai Mundhra

Write-off pool and income replacement Direct
So there are 2 aspects here. Suppose if the write-off pool may come down, but the NPA what all is there. If that is recovered, any upgrade will support us, though not up to PPOP, it will be coming up below PPOP and the provisioning will be released. And even provision is released, the need for further provisioning may not be there, and it may go into credit.

Analyst raised concern about shrinking write-off pool impacting profitability, and management explained how NPA recoveries, upgrades, and provisioning releases could offset this, along with levers like non-fund business and CASA growth.

Asked by Pritesh Bumb

MD/CEO succession plan Direct
Yes, yes. Absolutely. Board is already abreast of this. They are looking at it. At the appropriate time, call will be taken, and there will be sufficient time for the transition and for the handholding and for grooming also. You need not worry on that count. Board is equally aware, they are serious about this.

Analyst asked about the MD/CEO's announced departure, and management confirmed the board is aware and will manage the transition appropriately, providing reassurance.

Asked by Pritesh Bumb

El Nino impact on gold loan portfolio Direct
Agreed. Suppose if the agriculture gold loan is a clean loan you have given a Kisan Credit Card. Then to some extent, because we cannot blame the farmer also, there is a postponement of this thing, they may try to postpone. Whereas in respect of the gold loan, two factors play. One is the sentimental value for the gold attached because the family, and all these things will be there. That's why they will try to redeem the gold loan and take it back. For any reason, if they are unable to do that also, you have a backing of the gold. And our average, if you look at it, the LTV is around less than 65%.

Analyst questioned the impact of El Nino on the gold loan portfolio, and management explained the mitigating factors like sentimental value, gold backing, and conservative LTVs (less than 65%), indicating resilience.

Asked by Anand Dama

Opex growth vs. loan growth differential Direct
Agree, but you see opex last year, we have opened 13 branches. Next this year, 50 branches we was to open. And a few more, maybe spending on the IT also may be required, which you cannot postpone. IS is also required information security. These things where you need to mention, you need to do that. But growth-wise, we will not compromise on that.

Analyst asked if the large differential between opex growth (6%) and loan growth (15%) in FY26 would sustain, and management attributed higher opex to branch expansion (50 planned this year) and essential IT spending, while committing to not compromise on growth.

Asked by Gaurav Jani

2 min read 6 chapters

Detailed narrative

Q1 FY27 Performance Overview

Karur Vysya Bank reported a sustained growth momentum in Q1 FY27, with total business reaching INR 2,27,267 crores, reflecting a 6% quarter-on-quarter and 16% year-on-year increase. This growth was balanced across advances and deposits, both increasing by 6% QoQ. The bank's performance aligns with its disciplined business model, risk management, and customer engagement, with key performance indicators broadly in line with earlier guidance.

Advances and Deposits Growth

Advances grew to INR 1,04,680 crores (6% QoQ), while deposits increased to INR 1,22,587 crores (6% QoQ). RAM segments continued to dominate the advances portfolio at 86%, with the corporate segment contributing 14%. Retail advances saw a 6% QoQ growth, driven by jewel loans (12% growth) and mortgage loans (9% growth). CASA grew 9% over the same period, with Current Account portfolio up 19% and Savings Account up 4% QoQ, supported by both existing and new-to-bank customers.

Net Interest Margin (NIM) Dynamics

The bank successfully navigated the quarter to maintain a Net Interest Margin (NIM) of 4.26%, which is 1 basis point higher than the previous quarter. This improvement was achieved despite a 125 basis point repo rate cut since February '25, through effective calibration of the asset mix and optimization of yields. The cost of deposits increased by 4 basis points sequentially, while the yield on advances increased by 8 basis points to 10.01%.

Asset Quality and Provisions

Asset quality remained robust, with Gross NPA declining marginally to 0.74% and Net NPA remaining steady at 0.19%. Gross slippages amounted to INR 138 crores (0.13% annualized), lower than the previous quarter's INR 187 crores. The bank maintained adequate provisions, with total provisions to advances at 1.7%. An allocation of INR 90 crores was made towards NPA migrations, standard assets, and restructured assets, resulting in an annualized credit cost of 0.33%.

Non-Interest Income and Operating Expenses

Non-interest income for the period stood at INR 442 crores, a 28% sequential decline from INR 616 crores. This was primarily due to a INR 38 crore drop in core fee income and lower recoveries from written-off accounts (INR 103 crores vs. INR 216 crores in the prior quarter). Operating expenses increased sequentially by INR 41 crores to INR 769 crores, largely driven by a INR 47 crore increase in provision requirements for retiral benefits (AS 15) and a INR 12 crore increase in normal salary costs.

Strategic Initiatives and Outlook

The bank is expanding its branch network, planning to open 50 branches in H1 FY27, with 25 expected by the end of Q2. Efforts are underway to strengthen the NRI business, leveraging RBI's relaxation on FCNR(B) interest rate ceilings to attract deposits, with a target to double or triple the current USD 130 million base. The bank aims for credit growth of 1-2% over industry growth, with full-year NIM guidance of 3.7-3.8% and asset quality targets of less than 1.5% GNPA and less than 1% Net NPA.

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