Karur Vysya Bank Limited — Q4 FY26 earnings call

Call held 7 May 2026

Management summary

Karur Vysya Bank reported a strong Q4 and full-year FY26, achieving record net profits and exceeding NIM guidance. The bank demonstrated robust business growth, particularly in RAM verticals and CASA, while maintaining strong asset quality with declining NPAs. Management adopted a cautious approach to advances growth in Q4 and anticipates NIM compression in FY27 due to market dynamics, but remains focused on sustainable growth and profitability.

Highlights

  • Total business grew 15% YoY to INR2,14,420 crores as on 31st March 2026.

  • Net profit for Q4 FY26 was INR725 crores, highest in bank's history, and full-year net profit reached INR2,500 crores, a 29% YoY growth.

  • Net Interest Margin (NIM) for Q4 FY26 was 4.25% (excluding 7 bps interest income from tax refund), and 3.97% for the full year, surpassing the revised guidance of 3.9-3.95%.

  • Gross NPA improved to 0.75% from 0.76% last year, and Net NPA remained low at 0.19%, with a commitment to keep it below 1%.

  • CASA balances grew 12% YoY, with an actual growth of INR3,290 crores, marking the highest growth in 10 years.

Concerns

  • Moderation in advances growth in Q4 FY26 due to a conscious call to avoid unwarranted risk given geopolitical situations.

  • Housing loans grew modestly by 2% due to low yields and greater competition.

  • Expected NIM compression for FY27, guided at 3.75-3.8%, due to rising cost of deposits and competitive pressure on lending rates.

Key financials

3 periods

Headline

  • Total Business
    ₹2.14L Cr
    YoY +15%
  • Advances
    ₹98,754 Cr
    YoY +17%
  • Deposits
    ₹1.16L Cr
    YoY +13%
  • Gross NPA
    0.75%
  • Net NPA
    0.19%
  • CASA Growth
    12%
    YoY +12%
  • CRAR
    18.8%

Q4 FY26

  • Net Profit
    ₹725 Cr
  • NIM
    4.3%
  • ROA
    2.1%

FY26

  • Net Profit
    ₹2,500 Cr
    YoY +29%
  • NIM
    4%
  • Cost-to-Income Ratio
    42%
  • ROA
    1.9%

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.

Segment breakdown

  • RAM Verticals
    86% Share of Advances18% YoY Growth2% QoQ Growth
  • Retail Loan Book
    27% Share of Advances25% YoY Growth3% QoQ Growth
  • Agri Loan Book
    25% Share of Advances19% YoY Growth5% QoQ Growth
  • Commercial Book
    35% Share of Advances11.6% YoY Growth0% QoQ Growth
  • Agri Jewel Loans
    91% Share of Agri Portfolio55.6% LTV
  • MFI Portfolio
    ₹173 Cr Value18% Share of Total Portfolio
  • Corporate Portfolio
    12% YoY Growth
  • Unsecured Loan Book
    1.8% Share of Total Advances
  • Co-lending Loan Book
    ₹249 Cr Value

Capital allocation

high confidence
  • Dividend %130/share (final)
    I'm happy to share that we have declared a dividend of 130% as declared last year, and this is subject to shareholders' approval.
  • Liquidity Liquidity disclosed Our CRAR continues to be healthy and is at 18.76%, providing us comfortable headroom for growth. There may not be any need to raise money in financial year '26-'27 for the growth plan as our plough-back of net profits will take care of our growth plan. Our LCR is at 125.47%.
    Our CRAR continues to be healthy and is at 18.76%, providing us comfortable headroom for growth. There may not be any need to raise money in financial year '26-'27 for the growth plan as our plough-back of net profits will take care of our growth plan. Our LCR is at 125.47%.

Guidance & targets

Credit Growth

  • Overall Credit Growth Credit Growth · FY27 · High confidence 1% or 2% over industry growth
    We expect our credit growth to be 1% or 2% over the industry growth.

    — B. Ramesh Babu

Profitability

  • Net Interest Margin (NIM) Profitability · FY27 · High confidence 3.75% to 3.8%

    Previously 3.9% to 3.95% (revised guidance for FY26) → 3.75% to 3.8%

    We expect that NIMs to be in the range of 3.75% to 3.8% for the full year, though we are at 4% plus at the exit quarter of this year.

    — B. Ramesh Babu

  • Return on Assets (ROA) Profitability · FY27 · High confidence 1.7% to 1.8%
    Given the current macroeconomic environment and the anticipated effects on the net interest margins discussed earlier, we expect the ROA for the full year to be between 1.7% to 1.8%.

    — B. Ramesh Babu

Efficiency

  • Cost-to-Income Ratio Efficiency · FY27 · High confidence below 50%
    Our cost-to-income ratio would be below 50% as we have been continuously planning, and we'll endeavor to retain that way.

    — B. Ramesh Babu

Asset Quality

  • Gross NPA Asset Quality · FY27 · High confidence less than 1.5%
    GNPA is expected to be less than 1.5% and net NPA to be less than 1% for the full year.

    — B. Ramesh Babu

  • Net NPA Asset Quality · FY27 · High confidence less than 1%

    — B. Ramesh Babu

  • Slippages Asset Quality · FY27 · High confidence below 1% of asset book
    Slippages would be expected to be below 1% of the asset book.

    — B. Ramesh Babu

Liquidity

  • LCR Liquidity · FY27 · High confidence 115% to 120%
    LCR would be maintained around 115% to 120%.

    — B. Ramesh Babu

Branch Expansion

  • New Branches Branch Expansion · FY27 · High confidence 50 branches
    With respect to branch expansion, we are planning to open 50 branches. Out of that 38 will be regular and 7 will be liteand another 5, we are going to shortlist shortly.

    — B. Ramesh Babu

Portfolio Mix

  • Jewel Loans Portfolio Share Portfolio Mix · FY27 · Medium confidence 35%
    The jewel loans portfolio encompassing all verticals accounts for 30% of the bank's overall portfolio. We maintain an internal cap of 35%, growth will be pursued in either retail or agriculture segments based on prevailing circumstances as increased expansion in retail would also indirectly elevate the PSL requirements.

    — B. Ramesh Babu

  • Credit Business Mix (RAM and Corporate) Portfolio Mix · FY27 · Medium confidence 18% to 20%
    Our credit business mix, RAM and corporate would be in the mix of [18% to 20% as what we were mentioning earlier. However, it may toggle between another 5% allowance here and there can be there.

    — B. Ramesh Babu

Investment Portfolio

  • Investment Portfolio Yield Enhancement Investment Portfolio · FY27 · High confidence 15 to 20 basis points
    We expect 15 to 20 basis points investment portfolio yield, yield enhancement through strategic rebalancing of the HTM portfolio during '26-'27.

    — B. Ramesh Babu

  • Portfolio Duration Investment Portfolio · medium term · High confidence 4 to 4.5 years
    Our duration is relatively low at less than 4 years. We will maintain around 4 to 4.5 years in the medium term.

    — B. Ramesh Babu

What to watch in Q1 FY27

FY27 NIM Trajectory

Next quarter (Q1 FY27)
Current Q4 FY26 NIM 4.25%, FY26 NIM 3.97%
Target Within 3.75-3.8% band

Why it matters

Key profitability metric, management expects compression due to rising cost of deposits and competitive lending.

We expect that NIMs to be in the range of 3.75% to 3.8% for the full year... So we envisage a drop in margins due to expected rate increase in the retail time deposits.

Risks & concerns

  • Geopolitical Tensions and Economic Impact

    medium

    Conflict in West Asia, increased input costs, supply chain disruptions, and potential impact on demand and working capital utilization in certain sectors (e.g., textiles). The bank made a one-time prudential provision of INR163 crores for this.

    Management acknowledged

  • Competitive Pressure on NIMs

    medium

    Tightness in the deposit market and competitors offering finer rates are expected to lead to NIM compression for FY27, guided at 3.75-3.8%.

    Management acknowledged

  • Housing Loan Growth Moderation

    low

    Housing loans grew modestly by 2% due to low yields and greater competition in the segment.

    Management acknowledged

  • BNPL Partner Management Change

    low

    Growth in the BNPL book was negative compared to the previous year due to a midyear management change with the partner and elevated household leverage, though operations are now stable.

    Management acknowledged

Q&A highlights

7 direct
FY27 NIM Guidance & Growth Outlook Direct
NIMs to be in the range of 3.75% to 3.8% for the full year... Credit growth to be 1% or 2% over the industry growth.

Clarifies management's forward-looking expectations for key profitability and growth metrics, indicating a potential moderation in NIM due to competitive pressures and rising cost of funds.

Asked by Jai Mundhra

Impact of Geopolitical Tensions on Asset Quality & Provisions Partial
We have provided prudentially INR163 crores... towards sectors identified that may get affected due to ongoing geopolitical tensions... Too premature to say anything about that [ECLGS reversal].

Reveals a specific provision made for geopolitical risks and management's cautious stance on potential reversals from government schemes, highlighting a proactive but uncertain risk management approach.

Asked by Pritesh Bumb

Strategy for Fixed Rate Loan Book and Vehicle Loans Direct
If you look at our vehicle loan portfolio for the last 3 years, it has been coming down... the majority of the portfolio is jewel loans only.

Explains the bank's strategic shift away from vehicle loans due to pricing, delinquency, and commission issues, indicating a focus on jewel loans for fixed-rate growth.

Asked by Pritesh Bumb

Lower Write-offs in Q4 FY26 Direct
No need to go for a write-off. That's why consciously, we have gone for a lower write-off compared to earlier years.

Indicates confidence in asset quality and recovery mechanisms, suggesting that the bank is not aggressively writing off loans when recovery prospects are good and NPAs are low.

Asked by Pritesh Bumb

Competitive Pressure on Yields and Deposit Mobilization Direct
Market has much, much moved ahead as far as the concession pricing... If we do not budge the good accounts what all we have, we may have to lose.

Highlights the intense competitive environment for both lending and deposits, explaining the rationale behind the anticipated NIM compression and the need to balance margins with customer retention.

Asked by Rohan Mandora

Drivers of Strong Other Income Direct
Our processing charges also have gone up by 18%. And as I was mentioning, our third-party income also has gone up... non-fund based, that is guarantee business, which we started focusing last year, we could see an uptick there.

Provides a detailed breakdown of the non-interest income streams, indicating diversified revenue sources beyond traditional lending.

Asked by Akshat Agarwal

Proactive Slippage Recognition Direct
Consciously, we are looking at our gating conditions, whether we'll be able to manage... proactively few accounts where the sort of weakness we found out, we did it.

Explains that higher slippages in Q4 were a result of proactive identification and classification of borderline accounts, rather than a deterioration of asset quality due to external factors like geopolitical tensions.

Asked by Akshat Agarwal

Gold Loan Portfolio Concentration and Risk Management Direct
Internal limit 35%, currently 28-30%... Market price to our price, there is a margin gap of around 20%, 25%... Portfolio above 75% LTV is miniscule.

Addresses concerns about concentration risk in gold loans, detailing internal limits, LTV buffers, and robust monitoring mechanisms to mitigate price volatility and credit risk.

Asked by Akshay Badlani

3 min read 8 chapters

Detailed narrative

Robust Business Growth and Segment Performance

Karur Vysya Bank reported a 15% year-on-year growth in total business, reaching INR2,14,420 crores as of March 31, 2026. Advances grew 17% to INR98,754 crores, while deposits increased 13% to INR1,15,666 crores. RAM Verticals, constituting 86% of the overall advances portfolio, grew by 18% YoY and 2% QoQ, with retail loans making up 27%, agri 25%, and commercial 35% of the book.

Record Profitability and Strong Margins

The bank achieved its highest-ever net profit of INR725 crores in Q4 FY26, contributing to a full-year net profit of INR2,500 crores, a 29% increase over the previous year. Net Interest Margin (NIM) for Q4 FY26 stood at 4.25% (excluding a 7 bps tax refund impact), and the full-year NIM was 3.97%, surpassing the revised guidance of 3.9-3.95%. This margin expansion was primarily driven by a 9 bps reduction in the cost of funds and an 18 bps increase in the yield on funds during the quarter.

Maintained Asset Quality and Proactive Risk Management

Asset quality remained strong, with Gross NPA marginally improving to 0.75% from 0.76% last year, and Net NPA maintained at a low 0.19%. The bank made a one-time prudential provision of INR163 crores for sectors potentially affected by geopolitical tensions. Gross slippages for the full year were INR744 crores (0.75% of the loan book), with Q4 slippages at INR187 crores, partly due to proactive classification of borderline accounts.

Strengthening Deposit Franchise and CASA Growth

CASA balances grew by 12% year-on-year, with an actual growth of INR3,290 crores, marking the highest such growth in the last 10 years. Demand deposits increased 10% and savings deposits grew 13% (incremental INR2,505 crores). The bank consciously reduced Certificate of Deposits by INR1,773 crores in Q4 and avoided bulk deposits at year-end, focusing on stable granular retail deposits.

FY27 Outlook: Moderated Growth and NIM Compression

For FY27, the bank projects a cautious outlook with credit growth expected to be 1-2% over the industry average. NIMs are guided to be in the range of 3.75-3.8%, anticipating a drop due to rising retail term deposit rates (incremental at 7.2-7.5%) and competitive pressures on lending yields. The bank aims to balance top-line growth with profitability, even if it means compromising on margins in some segments like MSME.

Strategic Initiatives and Digital Adoption

The bank continues to focus on strategic initiatives, including enhancing collaboration between branches and open market channels for retail assets, and planning to launch premium credit cards and an NRI channel. Digital adoption remains high, with 98% of transactions being digital and the DLite mobile app achieving 2.5 million monthly active users and 7 million downloads with high ratings.

Capital Adequacy and Shareholder Returns

The Capital to Risk-weighted Assets Ratio (CRAR) stands healthy at 18.76%, providing ample headroom for growth without immediate need for capital raising in FY27. The bank declared a dividend of 130% (subject to shareholder approval), payable on the bonus shares issued last year, reflecting its commitment to shareholder returns.

Gold Loan Portfolio Management

The gold loan portfolio, which constitutes 30% of the overall advances, is managed with an internal cap of 35%. The bank maintains a significant margin buffer (20-40%) between market gold prices and its lending rates, with the loan-to-value (LTV) ratio for agri jewel loans at 55.59%. Portfolios with LTV above 75% are miniscule, indicating a risk-mitigated approach despite high demand.

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