KARNATKA BANK LTD Result Update: Q3 FY13 CMP 161.85 th BUY JAN 26 , 2013 Target Price 181.00 ISIN: INE614B01018 Stock Data SYNOPSIS Sector Banking Karnataka Bank Limited is a leading 'A' Class BSE Code 532652 Scheduled Commercial Bank and tech savvy Face Value 10.00 private bank of the country having pan-India 52wk. High / Low (Rs.) 198.80/70.80 presence. Volume (2wk. Avg ) 1156000 Net profit for Q3FY13 was up 11.13% to Rs. Market Cap ( Rs in mn ) 30481.21 800.70 mn as compared to Rs. 720.50 mn for Annual Estimated Results (A*: Actual / E*: Estimated) Q3FY12. Years FY12A FY13E FY14E During the half year, the Bank has opened 15 Net Income 31128.80 38259.03 43615.29 branches and 100 ATMs. NII 10784.00 12840.20 14461.53 CASA increased by Rs. 9750 mn from Rs. 71380 Net Profit 2460.70 3709.42 4611.64 mn to Rs. 81140 mn, registering a y-o-y growth EPS 13.07 19.70 24.49 of 13.7 per cent. P/E 12.38 8.22 6.61 The total deposit increased by Rs. 48350 mn Shareholding Pattern (%) from Rs. 297850 mn to Rs. 346200 mn, registering a y.o.y growth of 16.20 per cent. The total business has also increased by Rs. 85490 mn from Rs. 494750 mn to Rs. 580240 mn during the period, registering a y.o.y growth of 17.30 per cent. During the quarter ended December 2012, the 1 Year Comparative Graph bank has raised Rs. 25000.00 lakhs of Lower Tier II Subordinated Debentures/Bonds for augmenting its capital funds. The capital adequacy ratio stood at 12.93 per cent (under BASEL II standards) against the regulatory requirement of minimum 9 per cent. Net Income & PAT of the company are expected to grow at a CAGR of 23% and 31% over 2011 to 2014E respectively. BSE SENSEX KARNATKA BANK LTD Peer Groups CMP Market Cap EPS P/E (x) P/BV(x) Dividend Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Karnatka Bank Ltd 161.85 30481.21 13.07 12.38 1.17 35.00 ICICI Bank 1183.10 1354816.10 64.16 18.31 0.00 165.00 Axis Bank 1388.00 592892.00 114.75 12.10 2.60 160.00 SBI 2520.00 1691705.10 219.40 11.49 2.02 350.00 Investment Highlights Results updates- Q3 FY13, The company’s net profit jumps to Rs. 800.70 million as against Rs. 720.50 million in the corresponding quarter ending of previous year, an increase of 11.13%. Revenue for the quarter rose 20.90% to Rs. 9643.40 million from Rs. 7976.50 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 4.25 a share during the quarter, registering 11.10% an increase over previous year period. Net Interest Income is Rs. 3140.40 millions as against Rs. 2720.10 millions in the corresponding period of the previous year. Months Dec-12 Dec-11 % Change Net Income 9643.40 7976.50 20.90% PAT 800.70 720.50 11.13% EPS 4.25 3.83 11.10% Segment Revenue Particulars (Rs.mn.) Q3 FY13 Wholesale Banking 3206.70 Treasury Operations 2706.70 Retailing Banking 4375.20 Other Banking Operations 217.20 Total 10505.80 Latest Updates • The total business has also increased by Rs. 85490 mn from Rs 494750 mn to Rs 580240 mn during the period, registering a y.o.y growth of 17.30 per cent. • The total deposit increased by Rs 48350 mn from Rs.297850 mn to Rs. 346200 mn, registering a y.o.y growth of 16.20 per cent. The advances increased by Rs. 37150 mn from Rs. 196890 mn to Rs. 234040 mn, registering a y.o.y growth of 18.90 per cent. The clientele base increased by 10 lakhs from 58 lakhs as on December 2011 to 68 lakhs as on December 2012. • Current account, Savings account (CASA) increased by Rs. 9750 mn from Rs. 71380 mn to Rs. 81140 mn, registering a y-o-y growth of 13.7 per cent. • The capital adequacy ratio stood at 12.93 per cent (under BASEL II standards) against the regulatory requirement of minimum 9 per cent. • The bank is planning to increase the number of Service Outlets to 1000 by increasing the number of branches to 550 & ATMs to 450 by the year end. Against this, the bank has already opened 15 branches & 100 ATMs & as a result, at present Bank has 518 branches & 447 ATMs. The bank has plans to open about 15 financial inclusion branches and 28 ultra small branches during the current year, in line with its Financial Inclusion Agenda. • The Bank is Business Turnover of Rs. 65,0000 mn for FY 2012-13 with Deposits of Rs. 39,0000 mn and Advances of Rs. 26,0000 mn. • During the quarter ended December 2012, the bank has raised Rs. 25000.00 lakhs of Lower Tier II Subordinated Debentures/Bonds for augmenting its capital funds. • Karnataka Bank, the premier Private sector Bank of India, has been awarded with "Operational Excellence Award” in recognition of its excellent performance in ATMs and switch connected to National Financial Switch ATM Network. Karnataka Bank is operating its ATM network under the BRAND NAME Money Plant TM '. • Karnataka Bank opened its first Ultra small Branch at Byadanur village of Tumkur District on 27.12.2012. Ultra Small Branch will facilitate Direct cash Transfer of benefits under various Govt Schemes as part of its financial outreach programme in tune with national priority. Company Profile Karnataka Bank Limited, a leading 'A' Class Scheduled Commercial Bank in India, was incorporated on February 18th, 1924 at Mangalore, a coastal town of Dakshina Kannada district in Karnataka State. The bank took shape in the aftermath of patriotic zeal that engulfed the nation during the freedom movement of 20th Century India. Over the years the Bank grew with the merger of Sringeri Sharada Bank Ltd., Chitradurga Bank Ltd. and Bank of Karnataka. With over 88 years experience at the forefront of providing professional banking services and quality customer service, the bank now have a national presence with a network of 503 branches spread across 20 states and 2 Union Territories. Karnataka Bank is one of the leading scheduled, tech savvy private bank of the country having pan-India presence. Bank is one of the pioneers in Rural and Agricultural lending and has introduced good number of Agri. loan products for hassle free finance to Farm sector. The Bank has set a lending target of Rs.3770 crore to Agriculture sector by March 2013. NABCONS (National Bank for Agriculture and Rural Development Consultancy Services), a wholly owned Company of NABARD is a leader in consultancy services in the field of agriculture and rural development, serving both national and international clients viz: Govt. of India, State Governments, Banks and Financial Institutions, Companies, individuals, International Agencies etc. NABCONS operates from its offices located in 30 States of the country. It leverages on vast pool of technical experts available with NABARD in the field of agriculture, Plantation & Horticulture, Animal Husbandry, Agro-processing, Fisheries, Agri-engineering, Food Processing, Finance, Economics etc. The expertise and strong commitment to the quality helps achieving its clients to realize their potential. Products & Services offered MoneyClick MoneyClick TM - Retail: It offers different online services to our retail/individual customers, like balance enquiry, requests for Chequebooks, recording stop-payment instructions, balance transfer instructions, account opening and other forms of traditional banking services. This also offers utility bill payment services to our valued customers for payment of BSNL Mobile, Electricity, Water bills etc. MoneyClick TM - Corporate: In addition to the above services, our Corporate Customers can avail Trade Finance Facilities such as Import/ Export Credit facilities, Requests for Forward Contracts, Inland Trade, Bank Guarantee etc. Also Moneyclick TM facilitates access control at Corporate User level wherein various users at different hierarchy levels have varying powers to operate a corporate account. MoneyClick TM - Cyberkids: Children between 12-18 years who are having Account with us are eligible for this special e-banking facility. Mobile Banking mCommerce: Karnataka Bank offers its customers the convenience of paying for utility bills, mobile recharge, movie tickets, online purchases, retail shopping and much more at over 15,000 merchants directly from your mobile. Mobile Banking SMS Alert Facility: Karnataka Bank Mobile Banking SMS Alerts keeps its customers informed about the significant transactions in your Accounts. It keeps its customers updated. Money Transfer Real Time Gross Settlement (RTGS): RTGS is a payment system in which both processing and final settlement of fund transfer instructions take place on real time basis. It is a gross settlement system where fund-transfers are settled individually, i.e. without netting debits against credits. The Customer can avail this facility and make instantaneous transfer of funds to beneficiary`s account Karnataka Bank became a member of Real Time Gross Settlement (RTGS) System from 16th July 2004 and has been settling Inter-Bank transactions in Mumbai since then. MoneyQuick services can be accessed by customers which uses RTGS service. This MoneyQuick facility provides INTERBANK funds transfer. Western Union Money Transfer (WUMT): Western Union Financial Services International has a legacy of public trust built through more than 150 years of extra ordinary continuous service. This international money transfer system facilitates quick, secure, reliable and convenient transfer of funds all over the world. Online Shopping Online Shopping Service through Internet Banking (MoneyClick): tied up with major shopping websites to facilitate online shopping for all our Internet Banking customers.