Customers admire, analysts applaud

Customers admire, analysts applaud

Customers admire, analysts applaud

While maintaining traditional clout, KVB could successfully expand its base pan-India. KVB, with its long history of supporting large number of enterprises in their business growth, has shown its resilience to all storms. Its three-way strategy of discrete lending approach, focus on building operational efficiency on calculated book size as well as its commitment to quality business worked well. While analysts applaud its focus, investors cheer about value creation and customers admire its services. 


Six years ago, when Mr Venkataraman stepped into the HQ of Karur Vysya Bank, after serving India’s largest banking conglomerate – the State Bank group at various positions, he did not find any major revamping requirement within the bank, but began to focus on galvanizing its strengths further. As a banker, who knows two-end of the commercial banking  - from foreign currency syndication to agri and retail banking learnt from India’s banking behemoth, he found many scopes for improvement within KVB. He also found considerable talent pool within the bank, which can drive his vision of making it a respectable national bank with robust technology architecture and business model that can open sustainable stream of revenues. Armed with sound knowledge of every business verticals and operational nuances of the banking industry that he acquired through his long years in SBI rolling through home and foreign assignments, he could set KVB on a solid track – with Golden Vision on a new path. “I found in the bank a strong talent pool with determination to work with high level of integrity, [a strong system and process and good model waiting for a take-off. There was no need of change in the course but only a speed and operational control it required,” he recollects]. If a small bank like KVB can survive the test of time it can also dream bigger, he has made a right assessment. Revamping work in line with Boston Consulting prescription was on at that time.

Five years ago Econostar wrote: “KVB is expanding fast. Rapid expansion in its footprints in carefully chosen areas ensures correspondingly rapid expansion in business, of course quality business.” Since then the bank grew more than a quarter even in a slow growing market. It also wrote: “KVB also dreams of making itself the Best Bank in the country in terms of service, product, customer-relationship and of course balance sheet quality.” Today the market has recognized KVB as the one of the best in most of the operational parameters. Incidentally, the banking industry has been passing through an era of crisis over the last three years. But KVB could stay invulnerable to the trend to a great extent.

Mr Venkataraman rightly believes, banks know banking business better than anyone else, so do experienced bankers. While prudence is the fundamental principle of banking in all economic weather, some believe in taking digestible size of risk to ensure that they don’t miss some potential opportunities in good times. A good banker can read fine-prints of business wisdom under prevailing economic atmosphere to take a call on lending demands. But it is not always easy to read human mind, inner conscious of the borrowers and other external business risks. Longs years of a borrowers’ integrity alone cannot be a right tool to judge whether the proposal is lendable or not. Once lent, there should be an easily open-able door for asset recovery without much pain, if all life-lines and gestures of one-time-settlement fail.

A prudent banker always has enough ways out of all dilemmas, he avers. No bank would lend to someone who could be suspected to divert the credit towards non-proposed business or predicted to default wilfully. Lenders need to stay closer with the borrowers until the last rupee is repaid. The lender is also supposed to reach out to the clients, when they face unforeseen troubles and do their best from within their limit. This ensures better client relationship. A crisis faced by a business is not the end of the business. They may return to normalcy when the economy rebounds.        

When high profile loan delinquency has broken the back-bone of most of India’s banks, some banks like KVB could endure the storms because of excellent management foresights, acting on early warning bells, strategic shift of business focus. One may call it cautious step or conservative approach. But if you are dealing with your depositors’ money, you have to be cautious and prudent, he warns. It is easy for a bank to expand its book size, if that is the goal.  However, that comes with a greater risk, whether you want to take the risk or afford it in the long run is an option, he points out. As far as KVB is concerned the focus has been on a steady growth with stronger bottom line. The bank hasn’t looked at hasty business growth but growth with a sustainable stream of earning.

KVB seems to stick to the principle of slow and steady wins the race. It also adopted a principle of covering the future risk with higher provisioning. What impressed most investors in Mumbai upon the bank were its management quality, risk mitigation strategy and high-provision weighing balance sheet and the recoverable nature of assets. Analysts are not worried about the banks’ NPAs, but find ease at the quick possibility of recovery that may naturally lead to write-back of provisions.

Recently, Angel Broking issued a buy call on KVB stocks and advised investors to acquire and stay invested expecting a strong loan growth. “KVB had a fairly strong loan CAGR of 14.9% over financial year 11-17. However, financial year 2017 was year of consolidation and loan book grew by only 4.7%. We expect loan growth to pick up to 11% over financial year 17 and 19. Deposit growth is expected at nine per cent during the period,” it said in its research note. Its slippages remained high during financial year 17 and hence GNPAs went up to 3.58% as against 1.3%. However, it says, “large part of the troubled accounts has been classified as NPAs and hence gradually we expect the asset quality to improve.” 

The bank’s net interest margin improved 25 basis points in the year 2016-17. The last quarter saw NIM growing 59 basis points. The bank’s focus on CASA growth cut in cost of fund would lead to further improvement in NIM in the period ahead, Angel Broking’s research note indicated.