Karur Vysya Bank delivered exceptional second quarter results with net profit surging 40.91% year-on-year to ₹1,543 crore for Q2FY27 compared to ₹1,100 crore in the same period last year. According to The Economic Times, the bank's net interest income (NII) grew 19% to ₹1,497.3 crore from ₹1,261 crore in the corresponding quarter of the previous fiscal year. The strong performance was supported by net interest margin (NIM) improving to 4.34%, representing a 28 basis points year-on-year improvement from 4.2% in the corresponding quarter of the previous year. The net profit of ₹1,543 crore surpassed consensus estimates by approximately 3.3%, demonstrating the bank's operational excellence and market outperformance. Following the earnings announcement, Karur Vysya Bank shares rallied as much as 6% to hit a 52-week high of ₹365.85, reflecting strong investor confidence in the bank's performance.
The bank has upgraded its FY27 credit growth guidance to 18-20%, bolstered by strong all-round traction across retail, agriculture and MSME (RAM) sectors alongside corporate loan book. As reported by The Economic Times, MD and CEO Ramesh Babu stated that the bank is targeting 18-20% growth in total advances for FY27, with the bank's advances growing by around 16% last fiscal and believing this target is achievable with existing teams and systems. RAM (retail, agriculture and MSME) loans account for 86% of the bank's advances, while corporate lending makes up 14%. The bank intends to step up corporate lending but will cap high-value loans at around 20% going forward, avoiding large-ticket exposures and being selective in consortium lending. In the July-September quarter, the bank reported 20% year-on-year growth in gross advances to ₹1.1 lakh crore, up from ₹92,185 crore in the similar quarter last year.
The bank demonstrated significant improvement in asset quality metrics during the quarter. As reported by The Economic Times, gross non-performing assets (GNPA) stood at 0.69%, while net non-performing assets (NNPA) were at 0.18%. Return on assets (ROA) came in at 2.10% for the quarter, and return on equity (ROE) stood at 20.47%, indicating strong operational efficiency. Gross NPA declined to 0.69% from 0.76% year-on-year compared to 0.74% sequentially, marking an improvement of seven basis points from the previous quarter. Net NPA also remained stable at 0.18% compared to 0.19% in the same quarter last year, indicating the bank's enhanced risk management and recovery efforts during the quarter. This improvement in asset quality indicators reflects the bank's strengthened credit assessment and collection processes, with the low Net NPA ratio of 0.18% placing it among the cleaner balance sheets in its peer group.
The bank has guided for a 4% NIM in FY27 despite reporting margins above 4.2% for two consecutive quarters, as the bank expects competitive pricing pressures and moderation in benefits from loan repricing to weigh on yields. As reported by The Economic Times, MD and CEO Ramesh Babu noted that substantial inflow of foreign currency non-resident (FCNR(B)) deposits across banks could intensify competition for lending opportunities, prompting lenders to price loans more aggressively. The bank mobilised around ₹680 crore in FCNR(B) deposits during the quarter with no leverage provided as the Bank does not have an overseas branch. The bank's cost of deposits stood at around 5.49%, with the CEO expecting deposit rates to remain relatively stable over the next two to three months, supported by comfortable liquidity and FCNR(B) inflows. However, he noted that transmission of rate hikes will be deferred due to higher liquidity.
The bank is targeting corporate lending opportunities in commercial real estate, trade, food processing, spinning mills and transport, while selectively financing non-banking financial companies (NBFCs). Its NBFC exposure has declined to around 4% of the loan book from over 8% earlier. Gold loans are expected to remain a key growth driver, supported by lower borrowing costs at banks compared with NBFCs. The bank does not expect significant stress in its gold loan portfolio over the next six to eight months despite concerns over deficient rainfall, monitoring loan-to-value ratios and initiating margin calls where required. On the deposit side, KVB has stepped up mobilisation through dedicated sales channels even as customers shift savings balances to term deposits. The bank's liquidity position remained comfortable with the average liquidity coverage ratio (LCR) at around 129% during the quarter.
