Last month, Karur Vysya Bank got a new MD and CEO, in ex-Citi and BFC Bank alumnus P Seshadri. The bank has drawn attention from analysts for its relatively strong asset quality, at a time some of the larger banks have been struggling with rising NPAs. Karur Vysya is a Rakesh Jhunjhunwala portfolio pick where he has increased his stake end September, and he now owns 4.03% of the bank. The bank's share price is currently trading below the analyst average target.
Karur Vysya has one flag in the way its business is run: it remains a largely Tamilian bank with a very high local concentration of branches in Tamil Nadu, and more than half its branches located in that state, increasing the risks associated with having so much business in one region. This combined with its focus on self-employed demographics, and small-ticket loans, mean that localized crises or political issues can have a disproportionate impact on the bank's margins.
That having been said, the bank has been steadily improving its margins in the past quarters, and the June quarter had seen a 30% improvement in the operating margin, and a boost of 3.76% YoY to its net interest margins. CASA rose 29.4%. These will be the figures to watch in the September quarter results, alongside the bank's asset quality.