1 Dear Shareholder, Greetings from Karnataka Bank and I Hope All Is Well with You and Your Family. Countries Across the Globe Ar
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Regd & Head Office:Mahaveera Circle, Kankanady, Mangalore- 575 002 CIN:L85110KA1924PLC001128 Telephone no.0824-2228222 Fax no.0824-2225588 Email: [email protected] Website: www.karnatakabank.com Dear Shareholder, Greetings from Karnataka Bank and I hope all is well with you and your family. Countries across the globe are battling on all fronts against the outbreak of COVID-19, which has been declared as a Pandemic by the World Health Organization. COVID-19 is an unfolding event bringing uncertainty and India has also been considerably affected by the pandemic. The ongoing pandemic has posed a sizeable impact on life as well as business in the country across the sectors. Though, the magnitude of impact on different sectors varies, none of the sectors are completely out of its repercussions. Governments and Reserve Bank of India have come out with several monetary, regulatory and fiscal measures reassuring the affected sectors and providing much needed financial assistance at these times of distress. We, in Karnataka Bank, are making all out efforts to minimise the repercussion arising out of COVID-19 pandemic and to meet the stakeholders’ interest. The Financial Year 2019-20 posed several challenges to the banking sector, yet, your Bank has shown resilience and been successful in registering a satisfactory performance. The audited financial results for the quarter and year ended March 31, 2020 approved by the Board of Directors at the meeting held on June 6, 2020 is a testimony to the strength of your Bank and we are glad to share our performance highlights with you through this communication for kind information. Your Bank has been a steady performer over the years and has been able to successfully navigate the turbulent business environment in the past including financial crisis of 2008 arising out of sub-prime lending in the United States, Letter of Comfort related banking fraud in the year 2018 pertaining to a leading natioanlised bank, anxiety in the minds of depositors post-moratorium imposed on YES Bank by the Reserve Bank in March 2020 etc. and thus, truly emerged as a time tested Bank. As a testimony, we furnish here below the Bank’s track record viz. profitability, Net Worth, Book Value per share and the Capital Adequacy Ratio (CRAR) for over a decade, for your kind information. 1 2 * After considering the bonus shares issued during the FY 2019-20 PERFORMANCE FOR THE YEAR: We furnish below summary of our performance under selected business/financial parameters for your kind information. ( Rs.in cr.) 3 Months 12 Months Performance Indicators Q4 FY 20 Q4 FY 19 Q4 FY 20 Q4 FY 19 Turnover 128749.42 123280 128749.49 123280 Operating profit 391.54 324.23 1656.77 1449.81 Net profit 27.31 61.73 431.78 477.24 Return on Asset (%) 0.13 0.32 0.53 0.64 3 Earnings per Share (Rs.) 13.89 1.99 13.89 15.35 Return on Equity (%) 1.81 4.29 7.53 8.53 Net Interest Income 529.30 480.88 2030.36 1905.12 Net Interest Margin (%) 2.86 2.87 2.84 2.93 Gross NPA (%) 4.82 4.41 4.82 4.41 Net NPA (%) 3.08 2.95 3.08 2.95 Cost to Income Ratio (%) 59.62 57.97 51.65 50.13 CRAR (%) 12.66 13.17 12.66 13.17 CD Ratio (%) 79.35 80.10 79.35 80.10 CASA Ratio(%) 28.91 28.06 28.91 28.06 Provision Coverage Ratio 64.70 58.45 64.70 58.45 (PCR) (%) Book Value per share * After considering the bonus shares 192.06* 204.71 192.06* 204.71 issued during the FY 2019-20 The Operating Profit for the quarter (Q4FY20) has grown by 20.76% and stood at Rs. 391.54 crore as compared to Rs. 324.23 crore for the corresponding quarter of the previous year. Similarly, the Net Interest Income (NII) has grown by 10.07% during the quarter (i.e. Rs. 480.88 crore to Rs.529.30 crore). The Fee Based Income grew by 15.05% (i.e. Rs. 247.39 crore to Rs. 284.63 crore). During Q4FY20, your Bank earned quarterly Net Profit of Rs.27.31 crore as compared to Rs. 61.73 crore of Q4FY19. Net Profit for the year ended March 31, 2020 stood at Rs. 431.78 crore as compared to Rs. 477.24 crore for the corresponding previous year. Bank’s Gross Non-Performing Advances (GNPAs) stood at 4.82% and Net Non-Performing Advances (NNPAs) at 3.08% which was at 4.99% and 3.75% respectively as on previous quarter i.e., as on December 31, 2019. SMA2 accounts of the Bank are contained at Rs.23.65 crore as compared to Rs.168.41 crore as on March 31, 2019. The Provision Coverage Ratio (PCR) has further improved to 64.72% from 58.45% as on March 31, 2019. Further, the capital adequacy ratio is at a comfortable level of 12.66% as against the regulatory requirement of minimum of 10.875%. With all these, the Book Value per share is at Rs.192.06 (after considering the bonus shares issued during the FY 2019-20). The Bank has implemented COVID-19 Regulatory Relief Package as permitted by Reserve Bank of India. Digital banking is gaining momentum and has now improved to 83% as on March 31, 2020 as compared to 77% a year ago. 4 For detailed financial results, you may please visit our website at the link https://karnatakabank.com/sites/default/files/2020- 06/Annual_Financial_Results_2020.pdf Transformation: KBL–VIKAAS, the transformation initiative of the Bank has started showing desired results under different verticals such as Credit, HR, IT and Customer Engagements and the said initiative is aimed at further strengthening the fundamentals of the Bank so as to emerge as ‘Bank of the Future’. The DCOE (Digital Centre of Excellence) at Bengaluru is fully operationalised and is sphere-heading the digital journeys of the Bank, which is expected to have favourable impact on the efficiency of operations and customer experience going forward. Further, Bank’s wholly owned non-financial subsidiary “KBL Services Ltd.” will be functional during the current year. Issue of shares- Bonus and Qualified Institutions Placement (QIP) Pursuant to the approval received from the shareholders through Postal ballot, your Bank rewarded the shareholders with a bonus issue in the ratio of ONE (1) share for every TEN (10) shares held on the record date i.e. March 18, 2020. However, regarding QIP, in view of volatile market conditions and lower share price, Board of Directors may take a decision at an appropriate time keeping in mind the interest of all stakeholders before the expiry of the shareholder approval (i.e. by March 4, 2021). Dividend: Reserve Bank of India, vide circular DOR.BP.BC.No.64/21.02.067/2019-20 dated April 17, 2020, with a view to conserve capital in the Banks, directed all scheduled commercial banks not to make any further dividend payout from the profits pertaining to the financial year ended 31st March 2020 until further instructions. Therefore, even though your Bank had distributable profits for the year ended March 31, 2020 as per the dividend distribution policy of the Bank, having regard to the above directive, Bank has not recommended any dividend on equity shares for the financial year 2019-20. e-Annual General Meeting: Owing to COVID19 related lockdown situation and the social distancing health guidelines, the Ministry of Corporate Affairs (MCA) issued General Circulars viz. 14/2020/dtd 08.04.2020, 17/2020 dtd 13.04.2020 and 20/2020 dtd 05.05.2020, wherein, companies have been directed to hold annual general meetings through Video Conference (VC) or Other Audio Visual Means (OAVM) only and also advised to disseminate Notice of the AGM and Annual Report for the financial year 2019-2020 via email only to all the members to their registered email. Hence, Bank will be disseminating the Notice of e-AGM as well as Annual Report only through electronic means. We encourage you to cast your vote electronically and take active participation in the e- AGM being held through VC/OAVM, the date of which will be notified in due course. 5 Challenges Ahead: COVID19 pandemic has gulped the world economy and India is not an exception. The Governments and Reserve Bank of India are taking measures to control the damage and mitigate the sufferings. It is also a fact that every threat throws open certain opportunities also. COVID19 pandemic is forcing the industries to revisit the way of doing business and hence business models are likely to change. Your Bank, after having taken note of the emerging risks, has also moderated its business plans. Further, Bank has also initiated various Capital conserving and cost minimising measures so as to sail through smoothly during these difficult days. Safeguarding the health of our staff members has also engaged our due attention. Internal financial strengths coupled with supportive measures of the Governments/ Reserve Bank of India will be the Critical Success Factors to march ahead. Karnataka Bank, being in the financial sector for 96 years, will not leave any stone unturned in overcoming these challenges and is confident of coming out successfully in an era of unprecedented uncertainties and challenging times. Hence, Bank is determined to follow the business practices modelled on the trusted concept of “CONSERVE, CONSOLIDATE AND EMERGE STRONGER”. We look forward for your continued support on this journey. Do also have a look at our official pages/handles in social media through Facebook, Twitter, Instagram and YouTube for updates & latest developments.