Karur Vysya Bank open to acquisition, if it’s a right fit

Old generation lender Karur Vysya Bank (KVB) is open to acquiring a bank if an opportunity comes its way, said a top bank official.

K. Venkataraman, MD & CEO, KVB, gave this reply to a specific question on whether his bank would throw its hat into the ring to acquire one of the two distressed South-based old generation private sector banks (one headquartered in Tamil Nadu and the other in Kerala).

He, however, said the 96-year old Karur (Tamil Nadu) headquartered bank is not actively pursuing an acquisition at this point in time.

NOT A TARGET

On the possibility of KVB becoming an acquisition target once the Reserve Bank of India issues licenses for setting up new private sector banks, Venkataraman said: “We don’t want to be an acquisition target… Moreover, beyond 5 per cent shareholding Reserve Bank of India's permission is required… The RBI does not encourage unfriendly acquisitions.” The KVB chief said his bank is eyeing a business size (deposits plus advances) of Rs 1.25 lakh crore by 2016. Its current business size is Rs 61,000 crore (deposits Rs 35,000 crore and loans Rs 26,000 crore).

Pointing out that the bank is handholding corporate clients which are facing tough times, Venkataraman explained that if the umbrella is taken away when the client needs it the most, it will only end up hurting the bank.

“We will not hesitate in restructuring a loan account,” he added. About 2.7 per cent of the bank’s total loans have been restructured so far.

CAPITAL ADEQUACY

KVB has turned cautious in lending to corporates because of asset quality concerns.

This is reflected in the fact that year-on-year credit growth has slowed to 25 per cent in the current financial year so far against 34 per cent in the year-ago period.

“We will not grow our loan book blindly….There will be no compromise just for the sake of numbers. The safety of depositors’ money is of paramount importance,” said Venkataraman.

If it grows its loan book at an annual rate of 25 per cent, maintains the quantum of yearly capital plough-back and dividend payout, then the bank, which currently has a capital adequacy ratio of 14 per cent, will not need capital infusion till FY2014-15.

KVB stock hit a new high of Rs 555.70 per share on the BSE and NSE .
Keywords: Karur Vysya Bank, capital adequacy, credit growth, NPAs, stock movement.