Karur Vysya earnings rose 37% year over year to about INR788 crore in the quarter ended September 30, 2026, supported by higher net interest income and lower provisions. The bank’s second-quarter FY2026–27 results, approved on October 15, showed profit rising 4% from the preceding quarter, while management maintained its full-year net interest margin guidance above 4%.
Key Takeaways
- Lower provisions helped net profit grow faster than operating earnings.
- Advances expanded 7% sequentially, outpacing deposit growth of 5%.
- Management maintained full-year growth and profitability targets but cautioned that current margins were not assured.
Table of Contents
- Karur Vysya earnings benefit from lower provisions
- Loan growth outpaces deposits as margin pressures persist
- Bad-loan ratios improve, with additional buffers retained
- Full-year targets remain, but fee-income rules are unsettled
- Conclusion
Karur Vysya earnings benefit from lower provisions
The bank’s September 2026 quarterly financial results showed net profit of INR787.69 crore, compared with INR573.96 crore a year earlier and INR755.70 crore in the June quarter.
Operating profit before provisions increased about 14% year over year to INR1,162.20 crore. Provisions and contingencies other than tax fell to INR118.53 crore from INR274.37 crore, helping bottom-line profit grow substantially faster than operating profit.
Net interest income, calculated as interest earned less interest expended in the financial statements, reached INR1,497.37 crore, up about 19% from INR1,261.18 crore a year earlier. Operating expenses were almost unchanged sequentially at INR769.98 crore, while other income was INR434.81 crore.
| Item | Details |
|---|---|
| Basel III capital adequacy | 17.97% at September 30, 2026, versus 18.61% at June 30. |
| Liquidity coverage ratio | 129%, compared with management’s target range of 115%–120%. |
| Basic earnings per share | INR8.15 for the quarter, versus INR5.94 a year earlier; not annualized. |
| First-half net profit | INR1,543.39 crore, versus INR1,095.41 crore in the corresponding prior-year period. |
Loan growth outpaces deposits as margin pressures persist
Management put advances at INR111,589 crore, up 7% from June and 13% from the start of the financial year. Deposits increased 5% sequentially to INR128,123 crore. Current and savings account balances rose by a combined INR1,489 crore during the quarter, with existing customers contributing about 60% of that increase.
Commercial business lending grew 8% sequentially, retail advances increased 5%, and corporate and institutional loans rose 12%. Gold-backed lending remained a significant exposure: the jewel-loan portfolio stood at INR32,153 crore, or 29% of advances.
Management reported net interest margin of 4.26%, or 4.34% including an eight-basis-point benefit from a one-off interest recovery. The yield on advances rose eight basis points sequentially to 10.09%, but deposit costs also increased by four basis points.
Managing Director and Chief Executive Ramesh Babu said the bank remained confident of maintaining a full-year margin above 4%, although retaining the current 4.26% level could not be assured. He cited competitive loan pricing and said the benefit from converting gold loans from benchmark-linked to fixed rates had been exhausted.
Bad-loan ratios improve, with additional buffers retained
The gross nonperforming asset ratio declined to 0.69% from 0.74% in June, while the net ratio eased to 0.18% from 0.19%. Gross slippages were INR123 crore, equivalent to an annualized rate of 0.44%.
The bank created INR25 crore of floating provisions during the quarter. Management said total provisions represented 1.65% of advances, including standard-asset provisions, and annualized credit cost was 0.43%.
Return on assets was 2.10%, compared with 2.11% in the preceding quarter and 1.81% a year earlier. Management maintained its full-year target above 2%.
Full-year targets remain, but fee-income rules are unsettled
Management retained FY2026–27 credit-growth guidance of 18%–20% and expected the cost-to-income ratio to fall below 45% over the following two quarters.
Proposed insurance commission rules remained a potential risk to bancassurance income rather than a finalized change. Ramesh Babu said a preliminary assessment suggested commissions could decline by 60%–70% in some cases, while emphasizing that the final framework remained fluid.
On lending demand, he said working-capital utilization had remained broadly stable and there was no meaningful capital-expenditure demand among the bank’s customer base. Growth was coming largely from new customer acquisitions and loan takeovers.
Conclusion
Lower provisions and stronger interest income lifted Karur Vysya Bank’s September-quarter profit, while bad-loan ratios improved. The next quarterly results will show whether lending growth and expense control keep the bank on track for its retained full-year targets.
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