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    Karur Vysya Bank Limited

    KARURVYSYA
    Financial Services·30 Jan 2026
    Management Summary

    Karur Vysya Bank Limited delivered a strong Q3 FY26, reporting a 25% YoY increase in net profit to ₹689.96 crores, driven by significant NIM expansion to 3.99% and robust credit growth. Asset quality improved with a reduction in Gross NPA to 0.71%, while ROA climbed to 2.05%. The bank remains focused on deposit mobilization and strategic portfolio adjustments, though it anticipates potential NIM pressure in Q4 due to changing interest rate dynamics.

    Highlights

    5

    • Net Profit reached ₹689.96 crores, marking a 25% YoY and 20% QoQ increase, demonstrating strong profitability.

    • NIM expanded significantly by 22 bps QoQ to 3.99%, driven by a 16 bps reduction in cost of funds and a 6 bps increase in yield on funds.

    • Robust business growth with total business at ₹2,11,647 crores (up 16% YoY), advances at ₹97,052 crores (up 17% YoY), and deposits at ₹1,14,595 crores (up 16% YoY).

    • Asset quality improved with Gross NPA decreasing to 0.71% from 0.76% QoQ, and Net NPA remaining stable at 0.19%.

    • ROA for the quarter improved to 2.05% from 1.81% in the previous quarter, indicating enhanced operational efficiency.

    Concerns

    3

    • Management noted that the benefit from deposit repricing seen in Q3 may not continue in Q4, and some lower-priced deposits might reprice higher, potentially impacting NIM.

    • Uncertainty regarding recoveries from the technical write-off pool (estimated at ₹2,500 crores) due to ongoing legal proceedings and unknown recovery values.

    • The vehicle loan portfolio is expected to de-grow due to high delinquency levels and capital costs, indicating a strategic shift away from this segment.

    Key financials

    Single quarter

    06 metrics
    1. 01Net Profit₹689.96 Cr+25%YoY
    2. 02NIM4.0%+0.2%QoQ
    3. 03Advances₹97,052 Cr+17%YoY
    4. 04Deposits₹1.15L Cr+16%YoY
    5. 05Gross NPA71%-0.1%QoQ

    Segment breakdown

    RAM Verticals
    86% Share of Business4% QoQ Growth19% YoY Growth
    Corporate Banking
    14% Share of Business6% QoQ Growth (advances incl. credit substitutes)14.0% YoY Growth (advances incl. credit substitutes)
    Commercial Business
    36% Share of Business3% QoQ Growth21% YoY Disbursements Growth
    Retail
    26% Share of Business6% QoQ Growth (advances)
    ABG
    24% Share of Business
    List

    Capital allocation

    1
    high confidence
    CategoryHeadline
    Liquidity

    Liquidity disclosed

    CRAR Basel III at 16.05% provides comfortable headroom for growth. Liquidity Coverage Ratio (LCR) averaged 133% last quarter, well above regulatory requirement.

    Guidance & targets

    8
    CategoryTargetPriority
    Credit Growth
    Overall Credit Growth
    above 2% of the industry growth
    		Medium
    NIM
    Net Interest Margin
    3.9% to 3.95%
    		High
    ROA
    Return on Assets
    above 1.85%
    		High
    Asset Quality
    Gross NPA
    less than 1.5%
    		High
    Asset Quality
    Net NPA
    less than 1%
    		High
    Asset Quality
    Slippages
    less than 1% of our book
    		High
    Recoveries
    Recoveries from written-off accounts
    around INR600 crores
    		High
    Branch Expansion
    New Branches
    6
    		High

    What to watch in Q4 FY26

    5

    NIM trajectory

    next quarter (Q4 FY26 results)
    Current3.99% (Q3 FY26)
    TargetObserve if NIM stays within 3.9-3.95% full-year guidance, or if Q4 sees compression.

    Why it matters

    NIM is a key profitability driver, and management indicated potential pressure in Q4 due to rate cuts and deposit repricing.

    Our NIM YTD is 3.88% that is excluding one-off📎 item of the quarter 2. Considering the rate cut of 0.25% in December, which would have full effect in Q4. We expect NIM for the full year to be in the range of 3.9% to 3.95%. ... But overall, if you look at it, what all the benefit we have got it in this quarter may not continue in the next quarter for the deposit cost.

    Risks & concerns

    5
    RiskSeverity

    Competition in deposit sourcing

    Competition in sourcing deposits makes it challenging to fund loan growth without impacting margins. — Management acknowledged

    medium

    Interest rate environment impact on NIM

    Rate cuts in December 2025 will have full effect in Q4, potentially impacting NIM, and some lower-priced deposits may reprice higher. — Management acknowledged

    medium

    Uncertainty of recoveries from technical write-offs

    Recoveries from the technical write-off pool are uncertain due to ongoing legal proceedings and unknown recovery values. — Management acknowledged

    medium

    Impact of new LCR circular from FY27

    New LCR circular from FY27 could lead to a 2-3 percentage point drop in LCR, though current levels are robust. — Both acknowledged

    low

    High delinquency and capital cost in vehicle loans

    The vehicle loan portfolio is expected to de-grow due to high delinquency levels and associated capital costs. — Management acknowledged

    medium

    Q&A highlights

    8

    “Nothing actually because I'll tell you, last time also when we were mentioning, when we looked at our repricing of the deposit, major chunk of the deposits have come up in this quarter for the repricing. That has really helped us to reprice the deposit. Other than that, no one-off item like last quarter to what we had, nothing is there...”

    Clarifies that the strong NIM expansion in Q3 was organic, primarily driven by deposit repricing, rather than one-off events.

    asked by Jai Mundhra

    2 min read5 chapters

    Detailed Narrative

    01

    Overall Performance and Growth Momentum

    Karur Vysya Bank Limited reported a robust Q3 FY26, with total business reaching ₹2,11,647 crores, reflecting a 4% quarter-on-quarter and 16% year-on-year increase. Advances grew 5% QoQ and 17% YoY to ₹97,052 crores, while deposits increased 4% QoQ and 16% YoY to ₹1,14,595 crores. Net profit for the quarter stood at ₹689.96 crores, marking a significant 25% YoY and 20% QoQ growth, demonstrating sustained robustness and resilience in operations.

    02

    Margin Expansion and Cost Management

    The bank successfully expanded its Net Interest Margin (NIM) by 22 basis points quarter-on-quarter to 3.99%, primarily driven by a 16 basis points reduction in the cost of funds and a 6 basis points increase in the yield of funds. The cost of deposits reduced by 13 basis points sequentially due to major repricing. Operating profit for the quarter was ₹1,005 crores, a 23% increase compared to the prior year, with the cost-to-income ratio for the nine-month period at 43.98%, well within the guided range of less than 50%.

    03

    Asset Quality and Risk Management

    Asset quality continued to improve, with Gross NPA decreasing to 0.71% from 0.76% in the previous quarter, and Net NPA remaining steady at 0.19%. Fresh slippages for the quarter were ₹154.14 crores, annualized at 0.63%, a significant reduction from ₹350 crores in the preceding quarter. The bank made an NPA migration allocation of ₹114 crores, resulting in an annualized credit cost of 0.47% for the quarter. Management emphasized that slippages are well under control and spread across verticals, with no significant bunching.

    04

    Strategic Initiatives and Portfolio Mix

    The bank's business mix remained consistent, with RAM verticals constituting 86% and corporate banking 14%. Retail advances grew 6% QoQ, largely driven by jewel and mortgage loans. The corporate portfolio recorded 6% QoQ growth, focusing on segments like commercial real estate and capital markets. The bank is revamping its credit card business for new variants and has started affordable housing loans. The MFI portfolio reduced to ₹207.83 crores from ₹333 crores, reflecting a focus on prudent lending practices.

    05

    Deposit Mobilization and Liquidity

    Total deposits increased by 4% during the third quarter, with CASA balances growing 2% QoQ. Demand deposits grew 1% and savings deposits 2% QoQ, with new-to-bank savings accounts showing 6% YoY growth. The bank's CRAR Basel III stood at a healthy 16.05%, providing ample headroom for growth. The Liquidity Coverage Ratio (LCR) averaged 133% in the last quarter, well above the regulatory requirement, indicating strong liquidity management.

    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.