Karnataka Bank Ltd (KTKBANK) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day and welcome to the Karnataka Bank Q2 FY 2026-27 financial results conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. Today, we have with us on the call the MD and CEO, Mr. Raghavendra S. Bhat,
Moderator: and ED, Ms. BGSS, from Karnataka Bank. I now hand the conference over to Mr. Raghavendra S. Bhat, MD and CEO. Thank you, and over to you, sir.
Raghavendra S. Bhat (Karnataka Bank): Good evening, Mr. Aloke. Yeah. Very pleasant evening to everyone, and thank you for participating in the Q2 FY27 earnings call of Karnataka Bank, a banking institution that has successfully navigated the financial landscape for more than 102 years. The journey began in 1924 with a simple purpose to serve our customers with trust, prudence, and a personal touch. As we now continue our journey in the second century of financial service, we have grown increasingly resilient and continue to serve as a dependable banking ally for millions worldwide. Rooted in its legacy from the coastal city of Mangaluru in Karnataka, our Q2 FY27 performance showcases a steady consecutive quarterly expansion powered by our stakeholders, customers, and staff under the under the capable stewardship of our chairman and the board. We have successfully delivered on our promises to the investors and secured substantial enhancements across every primary financial metric, demonstrating the impact of structured implementation and operational excellence. Our strong growth trajectory reflects substantial operational progress, which will become clear as we walk through the financial metrics. I trust you have had the opportunity to walk through our financial results and investor presentation, which were circulated after yesterday's board meeting. Turning to the broader financial system, the Monetary Policy Committee, MPC, has unanimously voted to increase the policy repo rate by 25 basis points to 5.50% during its October 26 meeting. The MPC also decided to change the stance to calibrated tightening. Global growth remained resilient in 2026 so far, supported by AI-related investment and fiscal stimulus measures despite disruptions due to the ongoing West Asia conflict. Renewed energy price pressures stoked inflation pressures and prompted a more hawkish stance from the regulator. Fiscal sustainability concerns, persistent inflation, and geographical uncertainty raised bond yields, while equity markets remained volatile amid lingering concern on valuations of technology stocks. The domestic economy showed resilience in H1 '26-'27 despite continued global uncertainty amidst the conflict. The supply side pressures were well managed by proactive policy measures by the government that ensured adequate supply of key inputs. Real GDP recorded a growth of 7.8% in Q1 '26-'27, reflecting strong momentum in underlying economic activity. Aggregate demand remained strong on the back of both private consumption and investment. Going forward, India's macroeconomic outlook remains resilient, supported by domestic demand and strengthening investment despite persistent global uncertainties. The outlook remains vulnerable to geopolitical developments, volatility in global energy markets, and weather-related uncertainties. Weak monsoon, protracted geopolitical tensions, rising international commodity prices, additional frictions in global trade, and tightening of global financial conditions could adversely impact the growth outlook. Let me now present the business highlights. Bank has achieved its highest-ever aggregate business, which stood at ₹2,07,132 crore as of 30th September '26, up by 5% Q-on-Q from ₹1,97,007 crore as on 30th June '26, and up by 17% YoY from ₹1,76,461 crore as on 30th September '25.
Raghavendra S. Bhat (Karnataka Bank): Gross advances stood at Rs 92,015 crore as on 30th September '26, reflecting a QoQ growth of 6% from Rs 86,610 crore as on 30th June '26 and a YoY growth of 25% from Rs 73,644 crore as on 30th September '25. Our overall strategy is to continue our focus on growing retail, agri, and MSME book. Our RAM portfolio has grown from Rs 30 53,172 crore as on June '26 to Rs 56,969 crore as on September '26, which is a 7% QoQ growth, and from Rs 47,958 crore as on September '25, which is an 19% YoY growth. In absolute terms, MSME MSME, housing, gold, agri, and car loans have contributed around Rs 3,598 crore to our retail segment during Q2 FY '27. The bank continues to reduce low yield corporate exposure in accordance with our earlier stated strategy. We are systematically replacing the IBPC book with higher yielding loans to drive margin expansion. IBPC portfolio, which was at Rs 1,375 crore as on 30th June '26, has been brought down to Rs 1,309 crore as on 30th September '26. Accordingly, around Rs 66 crore have been replaced during Q2 FY '27. Going forward, our strategy focuses on accelerating retail expansion and stabilizing the corporate portfolio by prioritizing high-quality, better yielding assets. Aggregate deposits as on 30th September '26 stood at Rs 1,15,117 crore, reflecting a QoQ growth of 4% over 30th June '26, at Rs 1,10,396 crore, and a YoY growth of 12% over 30th September '25, at Rs 1,02,817 crore. CASA ratio as on September '26 was 31.80% and 32.42% as on June '26, and as against 31.01% as on September '25. The bank has continued to focus on shifting high cost bulk deposits to granular retail deposits of less than Rs 3 crore. The retail term deposits that is less than Rs 3 crore has grown by 4% from Rs 69,410 crore as on June '26 to Rs 72,197 crore as on September '26. On a YoY basis, retail term deposits have grown by 10% from Rs 65,531 crore as on September '25. The bank is actively trying to consciously lower its dependence on expensive bulk deposits while making sure that most of the renewals are carried out at established card rates, which allows for better management of the total cost of deposits. CD ratio as on September '26 stood at almost 80%, that is 79.93% as compared to 78.45% as on June '26, and 71.63% in September '25. Net interest income, NII, for Q2 FY '27 stood at Rs 982.44 crore as compared to Rs 938.29 crore in Q1 FY '27, registering a Q-on-Q growth of 5%. On a YoY basis, NII for Q2 FY '26 stood at Rs 728.12 crore, recording an 35% YoY growth. Net interest margin stood at 3.17% for Q2 FY '27 versus 3.20% in Q1 FY '27 and 2.72% in Q2 FY '26. Loan yields
Raghavendra S. Bhat (Karnataka Bank): funds for Q2 FY27 stood at 8.76% as compared to 8.68% in Q1 FY27, recording an eight bps improvement. Loan yields will be further strengthened by accelerating retail growth while stabilizing the corporate portfolio through high quality and better yielding assets. Cost of funds stood at 5.15% for Q2 FY27 as compared to 5.16% for Q1 FY27, registering a one basis point improvement. The sequential quarter-on-quarter improvement in cost of funds is expected to be supported by our continued efforts to reduce the dependence on bulk deposits and replacing the same with retail deposits at card rates and focus on CASA build-up. PAT. Q2 FY27 PAT stood at Rs. 435.89 crore as against Rs. 418.95 crore in Q1 FY27, with QoY, QoQ increase of 4%. There is an increase in PAT from Rs. 319.12 crore in Q2 FY26 with a YoY increase of 37%. Stressed assets. Gross NPA percentage as on 30th September '26 stood at 2.27% as against 2.58% in June '26, thereby showing an improvement of 31 basis points. The gross NPA percentage as on September '25 was 3.33%, which is a 106 basis points YoY improvement. Net NPA percentage as on 30th September '26 stood at 0.74% as against 0.87% in June '26, demonstrating a 13 basis points QoY, QoQ improvement. Net NPA percent as on September '25 was 1.35%, recording a 61 basis points YoY improvement. The sustained quarterly improvement in both gross and net NPA ratios reflects the bank's stringent efforts to curb slippages and enhance the monitoring efficiency, supported by the functioning of regional collection centers and quality credit underwriting strictly following the guardrails. Credit cost is 0.002% for the quarter Q2 FY27 as against 0.03% in Q1 FY27. Slippage was 0.11% for Q2 FY27 as against 0.14% in Q1 FY27. Standard restructured advances, including related accounts. As on 30th September '26, it was Rs. 649.37 crore as compared to Rs. 762.62 crore as on 30th June '26, recording a 15% quarter-on-quarter reduction, and standard restructured advances as on 30th September '25 was Rs. 939 crore, registering a 31% YoY reduction. PCR. In line with the bank's commitment to increase PCR, the bank has continued making accelerated provisioning, and the PCR stood at 68.05% as of September '26 as against 67.03% as of June '26. PCR, including technically written off account, stands at 85.78% as of September '26 as against 84.70% as of June '26. Cost to income. For the quarter ended 30th September '26, cost to income ratio stood at 52.68% as against 55.14% for the quarter ended 30th June '26 and 58.93% for the quarter ended 30th September '25. The bank bank's focus on low cost deposits along with an emphasis on RAM and high-yield portfolios to enhance loan yields would further expected to improve our net interest income and support sustained control over the cost to income ratio.
Raghavendra S. Bhat (Karnataka Bank): in the coming quarters. Return on Equity Q2 FY27 return on equity stood at 12.51% as against 12.48% in Q1 FY27, as against 10.14% in Q2 FY26. Return on Assets, Q2 FY27 return on assets stood at 1.26% versus 1.29% in Q1 FY27, as against 1.03% in Q2 FY26. Liquidity Coverage Ratio that is LCR, as on 30th September '26 LCR stood at 1, 164% versus 169% as on 30th June '26 and as against the statutory mandate of 100%. Capital Adequacy Ratio, 20.36% as on 30th September '26 of which Tier 1, 19.20% and Tier 2, 1.17% in comparison to 21.10% as on 30th June '26. For the calculation of CRAR for September '26, eligible profits as required under extant RBI guidelines have been considered. Products, we remain on track with our products development and launch initiatives with a continued focus on bridging the remaining gaps in our product offerings. Agri schemes, we are actively exploring the introduction of input finance and other agricultural credit products across various crops covered under their respective boards. Spices Board, Coffee Board, Tobacco Board, Tea Board, Rubber Board, etc., supported by structured repayment arrangements. This is expected to enhance the bank's core agriculture portfolio, increase in small and marginal farmer advances, and ensure and ensure assured repayment and recovery through board-supported payment mechanisms. MSME products, products launched during the period, GST Overdraft Facility, Loan Against Property for MSME, Drop-line Overdraft for MSME. And some other of the products which are in various stages of implement, it is in the pipeline, they are: Incorporation of drop-line OD features to key MSME products, end-to-end digitization of key MSME products, KBL Start-Up Finance - a dedicated credit scheme for start-ups and emerging enterprises. Retail products, products launched, Express Digi Gold Loan has been launched on 21st September '26, marks a strategic milestone in the bank's digital transformation, delivering a seamless, secure, and faster gold loan experiences. This initiative is poised to expand customer reach, accelerate business acquisition, enhance operational efficiency, and unlock scalable growth opportunities, strengthening the bank's competitive position in the gold loan segment. Up to 90% funding on project cost for purchase of ready-built under-construction residential units. Projects which are in the, products which are in the pipeline, limit enhancement in housing loan schemes, surrogate-based lending for housing and mortgage loans, number three, digital document execution for vehicle loans, number four, end-to-end portal for channel partners. Liability products, Capital Gain Account Scheme, a specialized account scheme to park capital gains funds to claim tax exemption. Number two, project in pipeline, launch of marketplace FD. ADC channels, alternate delivery channels, products launched, UPI Help, MyUPI, unified platform enables customers to view their transaction history, raise and track complaints, manage UPI mandates, etc. Number two, pinless CBDC transaction, customers can carry out CBDC transactions up to ₹500 per transaction without PIN, offering hassle-free experience. Trade Connect, a digital platform for import, export, outward remittances. Projects in pipeline under ADC channel are revamp of retail internet banking with new UI and UX. Number two, UPI for NRI customers. Number three, Soulabhya Plus Deposit enablement through digital channels.
Raghavendra S. Bhat (Karnataka Bank): and technology, the bank is leveraging IT investments through modular and faster implementation of solutions. Bank is also exploring, leveraging AI tools for improving internal efficiencies, including improving processes. Few major solutions that are launched and are now live: digitization of gold loans, interest bearing credit lines on UPI, SD-WAN, that is software defined wide area network, SD-WAN implementation, CDP, common data platform, MuleHunter, Sales Buddy, that is AI assistant. Few major solutions that are in progress. They are loan against mutual funds, shares under digital channel, secured credit cards, implementation of DPDP solution, new treasury application, new NPA management solution. The structural cornerstone of Karnataka Bank remains its resilient framework and capacity to capitalize on emerging growth opportunities. Over the recent periods, we have secured meaningful milestones by scaling our retail and MSME business lines, optimizing deposit and borrowing expenses, and strengthening the overall health of our credit portfolio, thereby establishing a powerful baseline for persistent advancement. Our approach remains heavily anchored in practical execution with modern digital adoption with human touch and tailored solutions already securing significant market traction. As these programs expand in scope, they are positioned to systematically enhance our interest spreads, bottom-line returns, and core operational metrics in the coming quarters. In the face of international disruptions stemming from global friction and logistical blockages, the bank distinguishes itself by maintaining conservative risk boundaries, operational flexibility, and a deep focus on customer relationships. Armed with strong capital reserves, comfortable cash positions, and focused strategic implementation, we remain distinctively prepared to generate long-term value for our stakeholders. Moving ahead, our defined blueprint and escalating commercial traction provide absolute certainty in our ability to maintain healthy expansion. Further, the bank is taking all required steps to effective efficiently mitigate risks in cyber and AI-related domains. We remain deeply committed to shaping a forward-looking, corporate governance anchored enterprise. As we honor our historical roots and steer through this rapidly transforming landscape, I want to express my sincere appreciation for your ongoing reliance and collaboration as we co-author the next phase of Karnataka Bank. I would now like to hand over the call to the moderator for any questions and feedback from our callers that we would be glad to take.
Moderator: Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Chirag Singhal with First Water Fund. Please go ahead.
Chirag Singhal (First Water Fund): Yeah. Am I audible?
Raghavendra S. Bhat (Karnataka Bank): Yeah, good evening, sir.
Chirag Singhal (First Water Fund): Good evening, sir. Congrats on a a a very good quarter. Just a couple of questions from my end. First is on the NIM and RoA guidance for the rest of the year. So, if I look at the benchmark, the 6-month T-bill, the yields have gone up in the last 1.5 month. So, is it fair to assume that the NIMs will be closer to the upper end of your target 3 to 3.4 range that you have given in the PPT? It will be closer to that range, the upper end of the range?
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