Summary
Karur Vysya Bank Limited - Q3 FY 2026 Earnings Call Summary Friday, January 23, 2026 6:00 P.M. IST
Event Participants
Executives 4 B. Ramesh Babu (MD & CEO), Chandrasekaran M S (COO), Ramshankar R (CFO), Sankar Balabhadrapatruni (ED)
Analysts 6 Anand Dama, Jai Mundhra, Jignesh Shial, Parth Gutka, Param Subramanian, Rohan Mandora
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Total Deposits | ₹1,14,595 crores | +16% YoY; +4% QoQ, driven by retail term deposits and CASA. |
| Total Advances | ₹97,052 crores | +17% YoY; +5% QoQ, RAM verticals constitute 86% of the mix. |
| CASA Ratio | 30.6% | +2% QoQ growth in balances; strategy prioritizing high-balance variants. |
| GNPA | 0.71% | -5 bps QoQ; improved from 0.76% in Q2 FY26. |
| NNPA | 0.19% | Remained steady QoQ; total net NPA below ₹200 crores. |
| Net Interest Margin (NIM) | 3.99% | +22 bps QoQ; driven by 16 bps reduction in cost of funds and improved fixed-rate mix. |
| PAT | ₹689.96 crores | +25% YoY; +20% QoQ, reflects strong operational efficiency. |
| Cost-to-Income | 43.98% | YTD figure; remains well within the guided range of <50%. |
| CRAR (Basel III) | 16.05% | Healthy capital position excluding current year profits. |
| Slippage Ratio | 0.63% | Annualized for the quarter; significantly down from ₹350 crores in Q2. |
Geographic & Segment Commentary
- RAM Verticals: Grew 19% YoY and 4% QoQ, now representing 86% of total advances. Retail grew 6% QoQ led by jewel and mortgage loans, while Agriculture grew 4% QoQ with a conservative 55.59% LTV on agri-jewel loans.
- Commercial & MSME: Recorded 3% QoQ growth with a 21% YoY increase in disbursements. Management launched a small business group relationship model in 79 branches to focus on high-potential MSME acquisition while exiting lower-priced/weaker accounts.
- Corporate Banking: Grew 14% YoY and 6% QoQ despite interest rate challenges. Focus remains on select segments like commercial real estate, capital markets, and EPC contractors to maintain spreads.
Company-Specific & Strategic Commentary
- Loan Mix Optimization: Fixed-rate loans increased from 15% to 23% of the total book QoQ to protect yields, while MCLR-linked loans reduced from 29% to 20%.
- Digital & Product Revamp: Plans to relaunch the credit card business with new variants by Q4 FY26 and scale affordable housing via co-lending partners.
- Asset Recovery: Achieved ₹601 crores in recoveries from written-off accounts YTD, meeting the full-year guidance of ₹600 crores ahead of schedule.
- Management Continuity: Board approved a 2-year extension for MD & CEO B. Ramesh Babu, effective until July 2028, ensuring management stability.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Loan Growth | >2% above industry avg | Engines across RAM verticals are firing; contingent on deposit mobilization. |
| NIM | 3.90% - 3.95% | FY26 full-year range; accounts for the 25 bps rate cut in Dec 2025. |
| ROA | >1.85% | Upgraded outlook based on sustained profitability and cost control. |
| Asset Quality | GNPA <1.5%, NNPA <1% | Confidence remains high due to low slippages and high collateralization. |
| Slippages | <1.0% | Management maintains strict monitoring across all verticals. |
Risks & Constraints
| Risk | Context |
|---|---|
| Deposit Competition | High competition for retail deposits may limit the pace of low-cost liability gathering, impacting the bank’s ability to fund high-growth loan segments. |
| Yield Compression | The 25 bps rate cut in December 2025 will fully kick in during Q4 FY26, potentially pressuring yields on EBLR-linked loans (55% of book). |
| Sectoral Weakness | Lower utilization observed in the textile sector during Q3; management is monitoring commercial account health. |
Q&A Highlights
NIM Sustainability
- Question: Was there any one-off in the 3.99% NIM or cost of deposit decline? (Jai Mundhra)
- Answer: No one-offs; it was “pure sweat.” Repricing of a large chunk of 400-444 day deposits maturing this quarter drove the 13 bps drop in deposit costs (Ramesh Babu).
Asset Quality & Slippages
- Question: Why did slippages rise sequentially if we exclude the Q2 corporate one-offs? (Jignesh Shial)
- Answer: There is no surge. Slippages are spread across RAM verticals, are well-under control, and significantly, most are now secured by collateral unlike 5-7 years ago (Ramesh Babu).
Loan Mix Strategy
- Question: Why is the vehicle book de-growing? (Parth Gutka)
- Answer: It is a conscious decision. Low yields, high capital charges (150%), and high commissions make it less attractive than other avenues for capital deployment (Ramesh Babu).
Management Succession
- Question: What is the succession plan given the 2-year extension? (Anand Dama)
- Answer: The extension provides 2.5 years from today. The Board and CEO will plan for a seamless transition well in advance (Ramesh Babu).
Key Takeaway
Karur Vysya Bank delivered a robust Q3 FY26, characterized by a significant NIM expansion to 3.99% and a 25% YoY growth in PAT. The bank successfully optimized its asset mix, increasing fixed-rate loans to 23% to mitigate interest rate volatility. Asset quality remains industry-leading with a GNPA of 0.71% and NNPA of 0.19%, supported by a conservative slippage ratio of 0.63%. Strategically, the bank is focusing on high-yield RAM segments while exiting low-margin corporate and vehicle loans. With a YTD ROA of 1.87% and the MD & CEO’s tenure extended by two years, the bank is well-positioned for stability. Management’s forward guidance remains optimistic, targeting an ROA above 1.85% for the full year, while focusing on deposit mobilization to fund a credit growth trajectory exceeding industry averages.
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