A cashier counts Indian one hundred-rupee banknotes at an Oriental Bank of Commerce branch in New Delhi, India (Photographer: Prashanth Vishwanathan/Bloomberg)

Karur Vysya Bank Falls 20% After Q3 Asset Quality Deteriorates

Shares of Karur Vysya Bank fell as much as 20 percent—the most in nearly 15 years—to Rs 63.20 on the National Stock Exchange after the lender's asset quality worsened in the quarter ended December.

The company’s gross non-performing assets in percentage terms rose to 8.49 percent for the three months to December from 5.94 percent clocked in the year-ago period, according to its stock exchange filing.

“The NPAs were higher in the third quarter on account of IL&FS exposure and due to one of the watchlist items that we had given in November 2017,” Karur Vysya Bank's Managing Director and Chief Executive Officer PR Seshadri told BloombergQuint. “Our aim is to build a balance sheet where NPA accretion is approximately 1.5 percent.”

Key Earnings Highlights (Q3, YoY)

  • Net profit down 70 percent to Rs 21.20 crore.
  • Net interest income up 3.4 percent to Rs 580.83 crore.
  • Net NPA at 4.99 percent versus 3.88 percent.

Here’s What Brokerages Had To Say On The Stock:

Kotak Institutional Equities:

  • Maintains 'Add' with a target of Rs 85.
  • The management chose to increase its guidance for slippages despite low SMA 1 and 2 accounts.
  • There are no near-term positive triggers barring an inexpensive valuation.
  • Shown consistent disappointment on asset quality, RoE or growth metrics in recent years.

Investec Securities:

  • Maintains 'Buy' with a target of Rs 79.
  • Small and medium enterprises stress is cropping up significantly.
  • Net interest margin expected to continue to do well and pre-provision operating profit growth.
  • Can grow their book without any need to raise capital for the next 5 quarters.

Watch the entire interview here: