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    Karnataka Bank

    KTKBANK
    Financial Services·11 Feb 2026
    Management Summary

    Karnataka Bank reported a mixed Q3 FY26, with strong operational growth in aggregate business and advances, and an improved NIM and CASA ratio. However, PAT, ROE, and ROA saw a QoQ decline, and gross slippages increased. The bank remains focused on RAM segment growth, optimizing funding costs, and improving asset quality, with management expressing confidence in achieving 1% plus ROA and 3% plus NIM by year-end.

    Highlights

    6

    • Aggregate business up 3% QoQ to INR 1,81,394 crores.

    • Gross advances grew 5% QoQ to INR 77,283.85 crores.

    • Net Interest Income (NII) grew 8.8% QoQ to INR 792.06 crores.

    • Net Interest Margin (NIM) improved to 2.92% from 2.72% QoQ.

    • CASA ratio improved to 31.53% from 31.01% QoQ, with CASA deposits growing 3% QoQ.

    • PCR (excluding technical write-off) improved to 61.23% from 60.22% QoQ.

    Concerns

    4

    • PAT decreased 9% QoQ to INR 290.79 crores.

    • Gross slippages increased to 0.47% from 0.35% QoQ.

    • ROE declined to 9.06% from 10.14% QoQ.

    • ROA declined to 0.92% from 1.03% QoQ.

    Key financials

    Single quarter

    13 metrics
    1. 01Aggregate Business₹1.81L Cr+2.8%QoQ
    2. 02PAT₹290.79 Cr+2.5%YoY
    3. 03Gross Advances₹77,283.85 Cr+4.9%QoQ
    4. 04Net Interest Income₹792.06 Cr+8.8%QoQ
    5. 05NIM2.9%+7.4%QoQ

    Capital allocation

    1
    CategoryHeadline
    Liquidity

    Liquidity disclosed

    Liquidity Coverage Ratio (LCR) stood at 186.84% as on 31st December '25, against 188.16% as on 30th September '25 and against the target of 100%.

    Guidance & targets

    12
    CategoryTargetPriority
    Margin
    Net Interest Margin (NIM)
    around 3% plus
    		High
    Margin
    Spread
    3% plus
    		Medium
    Efficiency
    Cost-to-Income Ratio
    55%
    		Medium
    Efficiency
    Credit-Deposit Ratio (CD Ratio)
    76% and 80%
    		Medium
    Profitability
    Return on Assets (ROA)
    around 1.1% or higher
    		High
    Profitability
    Return on Assets (ROA)
    1.1% to 1.2%
    		High
    Credit Growth
    Gross Advances
    INR 85,000 crores
    		High
    Credit Growth
    Advances Growth
    15% to 20%
    		Medium
    Asset Quality
    Technical Written-off Recovery
    INR 75 crores to INR 80 crores
    		High
    Asset Quality
    MSME Gross NPA
    5% or below 5%
    		High
    Business Growth
    Overall Business Growth
    around 15%
    		Medium
    Deposit Growth
    Liabilities Growth
    10% to 15%
    		Medium

    Net Interest Margin (NIM)

    Q4 FY26 / by year-end
    Current2.92%
    Targetaround 3% plus

    Why it matters

    NIM is a core profitability metric for banks, and management has expressed high confidence in achieving 3% plus by year-end.

    I am hopeful that it will be 3% plus during the quarter. It will happen because there is an improvement which you have seen. Added to that, it is this EBLR effect where the assets are getting repriced faster, liability side remains fixed. With all the focus on CASA it will, and, definitely 3% plus by the year-end.

    How to verify

    key_financials.metrics[label='NIM']

    Risks & concerns

    4
    RiskSeverity

    Impact of repo rate reduction on NIM

    Reduction in the repo rate put pressure on yields across the industry, impacting NIM. — Management acknowledged

    medium

    Stress in MSME portfolio

    MSME stress was 10.2%, brought down to 7.6%. Sectors like contractors, manufacturing, services face cash-flow issues. Management aims to reduce it to 5% or below by Q4 FY26. — Analyst acknowledged

    medium

    Competition

    Competition is a challenge, but the bank is improving TAT and focusing on compliance and quality in advances to mitigate its impact. — Management acknowledged

    medium

    Single large account impacting NPA

    One particular large account negatively impacted NPA figures, but management is confident of recovery due to good security in a prime location. — Management acknowledged

    medium

    Q&A highlights

    5

    “No, I will clarify this to you. As far as housing loan segment is concerned, there is no 26% stress, I will need to check this, and revert back to you.”

    Analyst pointed out 27% of housing loans in SMA 2, but management did not confirm or deny, promising to check and revert, indicating potential unacknowledged stress or lack of immediate data.

    asked by Vinay Nadkarni

    2 min read6 chapters

    Detailed Narrative

    01

    Q3 FY26 Financial Performance Overview

    Karnataka Bank reported an aggregate business of INR 1,81,394 crores as of December 31, 2025, marking a 3% QoQ growth. Gross advances increased by 5% QoQ to INR 77,283.85 crores, primarily driven by MSME, housing, and gold loan portfolios. Net Interest Income (NII) saw an 8.8% QoQ growth to INR 792.06 crores, and the Net Interest Margin (NIM) improved to 2.92% from 2.72% in the previous quarter. However, Profit After Tax (PAT) decreased by 9% QoQ to INR 290.79 crores.

    02

    Asset Quality and Provisioning

    The bank demonstrated an improvement in asset quality with Gross NPA percentage slightly decreasing to 3.32% (INR 2,565.31 crores) from 3.33% QoQ, and Net NPA percentage improving to 1.31% (INR 994.70 crores) from 1.35% QoQ. The Provision Coverage Ratio (excluding technical write-off) strengthened to 61.23% from 60.22% QoQ. Gross slippages, however, increased to 0.47% in Q3 FY26 compared to 0.35% in Q2 FY26, attributed to one particular large account.

    03

    Deposit Franchise and Funding Costs

    Karnataka Bank continued its focus on strengthening its deposit franchise, with CASA deposits growing 3% QoQ and the CASA ratio improving to 31.53% from 31.01% in the previous quarter. This strategy contributed to a reduction in the cost of deposits, which decreased from 5.5% in Q2 FY26 to 5.43% in Q3 FY26. Bulk deposits as a percentage of total deposits also reduced from 5.3% to 4.8%, indicating a shift towards more granular and stable funding sources.

    04

    Strategic Focus and Growth Segments

    The bank's strategic priorities remain centered on strengthening retail and MSME growth, optimizing funding costs, and sustaining asset quality. Retail, Agri, and MSME (RAM) segments are identified as core growth drivers, with corporate portfolio rationalization continuing towards higher-yielding assets. Management noted that growth momentum, particularly in RAM segments, started picking up from October onwards, supported by revised interest rates and delegated powers to regional centers.

    05

    Efficiency and Profitability Outlook

    The Cost-to-Income Ratio improved slightly to 58.72% from 58.93% QoQ, and management expects it to further reduce to 55-56% in the coming quarters. Despite a QoQ decline in ROE to 9.06% and ROA to 0.92%, the bank is optimistic about achieving an ROA of 1% plus by the end of FY26. Longer-term ROA targets are set at 1.1-1.2% for FY27 and 1.2-1.3% for FY28, with overall business growth projected at 15% in the long term.

    06

    Product Development and Digital Transformation

    Karnataka Bank is actively pursuing new product development and digital transformation initiatives. Planned launches include a dedicated product for SHG lending and 'Soulabhya Deposit' with partial withdrawal facility. The bank is also exploring opportunities under the Agri Infrastructure Fund and forming ecosystem tie-ups for MSME business, including electric-vehicle financing. These efforts aim to enhance customer experience and improve operational efficiency.

    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.