The Karnataka Bank (KTKBANK) Q2 24/25 earnings summary

Executive summary

• Major restructuring and transformation initiatives completed, including new leadership, digital upgrades, and business process centralization to support growth and operational efficiency.

• Strategic focus shifted to portfolio quality over growth in Q2 FY25, pausing bulk low-yield advances and deposits to prioritize profitability and asset quality.

• Gross advances grew 12.5% YoY to ₹75,316 crore; deposits rose 11.7% YoY to ₹99,968 crore in Q2 FY25.

• PAT for Q2 FY25 was ₹336.07 crore, up from ₹330.26 crore YoY, though down 16.1% sequentially from Q1 FY25.

• Results reflect adoption of new RBI investment classification and valuation norms from April 1, 2024, impacting comparability with prior periods.

Financial highlights

• H1 FY25 PAT at ₹736.4 crore, up 5% YoY; Q2 PAT at ₹336.07 crore, with prior quarter including a one-time IT refund of ₹81 crore.

• NII for H1 FY25 at ₹1,736.92 crore, up 6.1% YoY; NIM at 3.38% for H1, within guidance range.

• Fee income increased 13.3% YoY to ₹223 crore; non-interest income up 8.2% YoY.

• Cost-to-income ratio rose to 58.3% from 51.3% YoY, elevated due to one-time tech investments and hiring.

• Credit cost at 0.09% for Q2, lowest so far; provision coverage ratio at 80.14%.

Outlook and guidance

• Advances growth guidance revised to 15%-18% for FY25, down from earlier 18%-19%, with focus on higher-yielding retail and direct-to-corporate lending.

• NIM expected to improve as portfolio shifts to higher-yielding segments; cost-to-income ratio targeted to return to 50%-55% in H2.

• ROA guidance maintained at 1.2%-1.25%; ROE expected to recover from current dip as profitability improves.

• Targeting CASA ratio of 30–32%, NNPA of 1.0–1.5%, NIM of 3.4–3.7%, and ROA of 1.2–1.4%.

• Focus on consolidating financial position, optimizing funding costs, and enhancing asset quality.