KARNATAKA
BANK has published results for the quarter ended 30.06.2015. Snapshot of the
results is as under
(Rs
in Crores)
Parameters
|
Quarter
ended 30.06.2014
|
Quarter
ended 30.06.2015
|
Variation
(+/-)
|
Operating
Profit
|
188
|
239
|
+27%
|
Provision
for NPA
|
56
|
116
|
+107%
|
Tax
Expenses
|
44
|
14
|
-68%
|
Net Profit from operations
|
88
|
109
|
+24%
|
Extraordinary
Income
|
33
|
-
|
-100%
|
Reported
Net Profit
|
121
|
109
|
10%
|
Operating
Profit and Net Profit from operations increased, however reported Net Profit
was 10% lower.
Reason
for lower reported Net Profit- Previous year bank was booked extraordinary gain
of Rs.33 Crores in June 14 quarter, which was NIL in June 15 quarter. Bank has
also made higher provision for NPA. In June 14 quarter bank has booked profit
of 44 Crores from Treasury operation, but in June 15 quarter is has booked loss
of Rs.5 crores from Treasury operation, because increase in yield on bonds.
Position
of Non Performing Assets (NPA)
(Rs
in Crores)
Parameters
|
Quarter
ended 30.06.2014
|
Quarter
ended 30.06.2015
|
Variation
(+/-)
|
Total
Advances
|
28837
|
31351
|
+8.72%
|
Gross
NPA
|
999
|
1034
|
+3.50%
|
Provision
for NPA
|
318
|
395
|
+24.21%
|
Net NPA
|
681
|
639
|
-6.17%
|
Gross
NPA in %
|
3.43
|
3.26
|
-17
points
|
Net NPA in %
|
2.37
|
2.05
|
-32 points
|
In comparison
of increase in Total Advances of 8.72%, Gross NPA increased 3.50% only. Due to
higher provision made for NPA, Net NPA decreased 6.17%. In percent terms Net NPA
decreased 32 points which is in the line of guidance given by the bank to reduce
Net NPA below 1% by March 2016. If same trend will continue bank will able to
reduce 3X0.32= 0.96 points Net NPA in next three quarters. Bank is also aggressive
to sell NPA to ARCs. Bank has sold 50 Crores NPA to ARC in June 15 quarter and It
is expected that bank will sell further 300 Crores NPA to ARCs by March 16. In
view of higher Total Advances target of Rs.37500 Crores as on 31.03.2016, I believe
that bank will able to bring down Net NPA below 1% by March 2016.
Why
KARNATAKA BANK will perform?
a) It is lowest valued Private Sector Bank.
b) Its management is looking serious about bring down Net
NPA below 1% by March 16.
c) After decrease in Net NPA, its share prices will get
rerated by market.
d) Due to lower crude prices in next one year, CPI will
below 6%, well within RBI expectations. Therefore, there is a scope for further
rate cut by RBI.
e) After Rate cut Bond prices will fall and bank will
book profit from Treasury operation.
Disclaimer:
I am not a research analyst. Please take own decision after read the results, annual reports.