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Informist, Thursday, Oct. 16, 2025

By Pratiksha

NEW DELHI – Karur Vysya Bank Ltd.'s net profit is seen rising only slightly on year in the September quarter despite robust loan growth, according to brokerages tracking the lender. The continued fall in the net interest margin is likely to eat into the lender's bottom line, analysts said.

The private-sector lender's net profit is expected to rise 6% on year to INR 5.02 billion in the reporting quarter, according to an average of estimates from five brokerages. Sequentially, the net profit is expected to decline 4%. YES Securities Ltd. has the lowest estimate for the bank's net profit for the September quarter at INR 4.54 billion while Emkay Global Financial Services Ltd. has the highest at INR 5.30 billion. The bank will detail its September quarter financial results on Friday.

"We expect flat earnings growth as there is pressure on revenue growth due to the ongoing net interest margin compression cycle. Loan growth is solid at ~15% year-on-year while deposits grew ~15% year-on-year, better-than-industry trends," Kotak Securities Ltd. said in a pre-earnings report.

According to the provisional figures released by the Tamil Nadu-based bank, advances grew 15.5% on year to INR 927.19 billion as of Sept. 30 on top of the 15% on-year growth in the previous quarter. "Credit growth remains strong, but lower margins and (lower) treasury gains to contain earnings growth," Emkay Global said.

Brokerages expect the lender's net interest margin to contract in the September quarter, primarily due to the Reserve Bank of India's Monetary Policy Committee cutting the repo rate by 100 basis points in 2025 so far. Kotak Securities expects the bank's net interest margin to fall to 3.39% in the September quarter, down 38 bps on year and 12 bps on quarter. 

The bank's net interest income--the difference between interest earned and expended--is seen rising 2.6% on year to INR 10.87 billion in the September quarter, according to the average of estimates. The estimates for net interest income in the quarter range from INR 10.71 billion to INR 11.04 billion. "Net interest income growth will be slower than average loan growth due to fall in yield on advances outpacing cost of deposits. Consequently, net interest margin will be lower sequentially," YES Securities said.

ICICI Securities expects the lender's slippages to rise 38% on year and 33% on quarter in the reporting quarter to INR 2.50 billion, which will weigh on the bank's bottom line. The bank's slippage ratio rose to 0.84% in the June quarter from 0.57% in the previous quarter. Slippages in the June quarter were INR 50.00 million, down from INR 170.00 million in the corresponding quarter a year ago.

"We expect an unchanged headline gross and net non-performing loan ratio but slippages likely to be at ~1% (INR 2 billion) with no major concerns on commentary on asset quality," Kotak Equities said. "Near term concern is likely to shift towards asset quality, growth and profitability." 

Brokerages will keep an eye on the bank's commentary on asset quality, loan and deposit growth and business growth strategy. Shares of the lender have declined 0.8% since it declared earnings for the June quarter on Jul. 24. At 1025 IST, shares of the bank were 0.5% higher at INR 223.66 on the National Stock Exchange.

The bank's bottom line for the June quarter had risen 14% on year to INR 5.21 billion owing to robust other income and a fall in provisions. Of the seven brokerage reports on the bank available with Informist, six have a 'buy' rating with an average target price of INR 292 per share and one brokerage has a 'sell' rating on the lender. 

The following are the Jul-Sept earnings estimates for Karur Vysya Bank from five brokerages in descending order of the estimate of net profit in INR million:

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Tanima Banerjee

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