The stock of Karur Vysya Bank, an older-generation private sector lender, hit an all-time high today, on rumours of it being seen as an acquisition target. However, the bank management strongly denied such a possibility and went on to announce a five-year growth plan.
The stock closed at Rs 524.70, up 0.6 per cent from its previous close.
“We do not want to be a target for acquisition. People may be interested in us. But an unfriendly takeover in the banking system is not going to be easy,” said K Venkataraman, managing director and chief executive officer of the Tamil Nadu-based bank.
Adding, at a press conference to announce growth plans: “Everything depends on what the Reserve Bank is going to formulate in giving new banking licences. I do not think RBI will permit any unfriendly acquisition. Since the last 96 years, we have been maintaining our identity.”
Following Parliament’s approving the Banking Regulations (Amendments) Bill, opening the way for RBI to issue final guidelines on new bank licences, some of the old-generation private banks are perceived as acquisition targets by the market.
Bank of America Merrill Lynch analyst Rajeev Varma, in a recent report, has said there’s a high possibility of many of the new banks considering acquiring the older banks with large distribution networks, such as Karnataka Bank and Federal Bank.
Karur Vysya has setup an ambitious target of doubling its balance sheet size over the next four years.
“Our balance sheet size stands at Rs 61,000 crore at present and it’s our aim to take it to over Rs 125,000 crore by 2016, which coincides with our centenary celebrations,” said Venkataraman. Their total business target for the current financial year is Rs 72,000 crore.
The bank inaugurated 15 branches today, to take its total network strength to 514. It plans to have 700 branches to touch the intended balance sheet size, he said.
The total deposits are Rs 31,000 crore and advances are at Rs 26,500 crore. The latter saw subdued growth this year. The bank recorded 24 per cent year-on-year credit growth, as against 34 per cent last year. “This is also due to the fact that we are cautious on lending, as we want to maintain the asset quality,” said Venkataraman. The gross non-performing assets ratio is 1.33 per cent.
On margins, he said while the net interest margin was 2.93 per cent, the bank was aiming to stabilise it above the three per cent mark. This could be done by increasing the low-cost deposit share, now 22 per cent. The bank aims to increase the share of Casa (current and savings account) deposits to 30 per cent of the total.
It has a healthy capital adequacy ratio of 14 per cent and no plans to raise capital for the next financial year, as it will not need any additional capital for the transition to Basel-III rules.