My take on Q1 24 Karnataka bank results and conference call.
- Q1 was operationally a weak quarter like it is for most banks. Their deposits went down, NIM went down, their CRAR went down even though loan growth was insignificant. This means the loans were comparatively risky and still the NIMs declined.
- The bank sits on a steady state net profit of 250 to 350 crore per quarter on the existing business which they call a cash cow business, without having to invest much or tweek anything, on back of which they are building the new “Digital” and in that “Retail Business”.
- The bank has many product gaps and this is having a negutive impact on their overall basket offering which no new generation customer wants. The good part is they are working on it and trying to fill gaps and better existing offerings.
- There is a noticable change in the top tier management mindset and they are ready to forgo short term profit to aim for longer term benefits like investing in technology, people, processes and products, where there could be a short term pain or low profitability but a solid launchpad for next growth phase.
- The new MD talks about a reset bank that will work like a startup bank… I would say thats a tall ask for a 99 year institution to undertake… but said that its not impossible. I hope they are able to do that.
- The bank plans more branch expansion of 50 new branches this year which as per me is very low number if they want to achieve a loan growth of 18-20% a year but once again doable.
- Biggest point I would see is that how well they are able to control NPA and underwriting capablities.
- Their vision of transitioning from a bank conined to Karnataka and a couple of states to a pan India Story. This I find very interesting as now they will have focused growth rather than growth by chance in other states with more visibility and also challange the established national banks.
- Most of conall was about what they want to do and how will they do it, the fist step of having a clear vision is checked, now the second step of implementation needs to be seen and how the execution is giving results. I am sure there will be some exiting time in next 2-3 years for this bank.
Disc - Invested and may incease or decrease or even exit anytime.
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