Karnataka Bank reports 8.0% Net Income decline in 2016

20-05-2016 • About Karnataka Bank ($KTKBANK) • By InTwits

Karnataka Bank reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:

Karnataka Bank has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.1%. At the same time it's a lot of higher than industry average of 11.2%.
CAPEX is quite volatile: ₹586m in FY2016, ₹812m in FY2015, ₹569m in FY2014, ₹399m in FY2013, ₹296m in FY2012
The company has business model with average profitability: ROIC is 10.1%
It operates with medium-size leverage: Net Debt/EBITDA is 1.9x while industry average is

Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

The company's Revenue increased on 4.9%. Revenue decline was accelerating on average at -5.6 pp per annum in FY2012-FY2016.

Net Income margin decreased slightly on 1.1 pp from 8.6% to 7.5% in FY2016.

Investments (CAPEX, working capital and M&A)

In FY2016 Karnataka Bank had CAPEX/Revenue of 1.1%. Karnataka Bank showed almost no change in CAPEX/Revenue from FY2013 to FY2016. It's average CAPEX/Revenue for the last three years was 1.3%. During FY2012-FY2016 CAPEX as a % of Revenue topped in FY2015 at 1.5%.

Return on investment

The company operates at low ROIC (10.1%) and ROE (11.7%). ROIC showed almost no change in FY2016. ROE decreased on 2.3 pp from 14.0% to 11.7% in FY2016.

Leverage (Debt)

Debt decreased slightly on 0.66% while cash increased on 6.3%.

Karnataka Bank has no short term refinancing risk: cash is higher than short term debt (551.6%).

Management team

The company's CEO P Jayarama Bhat has spent 11 years with the company. Karnataka Bank's CFO is B Chandrashekar Rao. B Chandrashekar Rao has 4 years tenure at the company.

Financial and operational results

Karnataka Bank ($KTKBANK) key annual financial indicators

mln. INR	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	33,935	41,951	46,657	52,651	55,228	4.9%
Net Income	2,461	3,481	3,110	4,515	4,153	-8.0%
Balance Sheet
Cash	17,048	17,180	21,527	24,884	26,456	6.3%
Short Term Debt	2,439	9,392	10,464	5,485	4,796	-12.6%
Long Term Debt	11,471	8,903	9,565	7,904	8,505	7.6%
Cash flow
Capex	296	399	569	812	586	-27.9%
Ratios
Revenue growth	27.5%	23.6%	11.2%	12.8%	4.9%

Net Income Margin	7.3%	8.3%	6.7%	8.6%	7.5%	-1.1%
CAPEX, % of revenue	0.9%	1.0%	1.2%	1.5%	1.1%	-0.5%

ROIC	6.8%	10.2%	7.7%	10.4%	10.1%	-0.3%
ROE	9.8%	12.8%	10.5%	14.0%	11.7%	-2.3%

Peers in Banks

Below you can find Karnataka Bank benchmarking vs. other companies in Banks industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Kotak Mahindra Bank ($KOTAKBANK)	-	22.9%	7.1%	26.1%	29.2%
Dcb Bank ($DCBBANK)	-	26.2%	22.5%	25.3%	20.8%
Yes Bank ($YESBANK)	-	33.7%	21.6%	17.7%	18.9%
Axis Bank ($AXISBANK)	-	24.5%	13.1%	15.6%	14.9%
Lakshmi Vilas Bank ($LAKSHVILAS)	-	16.7%	11.7%	14.2%	14.6%
Median (23 companies)	45.9%	15.7%	10.6%	10.2%	4.7%
Karnataka Bank ($KTKBANK)	-	23.6%	11.2%	12.8%	4.9%

Top companies by CAPEX/Revenue, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Union Bank Of India ($UNIONBANK)	1.2%	1.3%	1.2%	1.0%	4.4%
Indian Bank ($INDIANB)	1.2%	1.3%	1.0%	1.4%	4.3%
Axis Bank ($AXISBANK)	1.4%	1.4%	1.6%	1.2%	2.9%
Lakshmi Vilas Bank ($LAKSHVILAS)	2.1%	1.4%	1.6%	2.4%	2.4%
Idbi Bank ($IDBIBANK)	0.6%	0.4%	0.7%	0.8%	2.3%
Median (23 companies)	1.3%	1.2%	1.3%	1.3%	1.3%
Karnataka Bank ($KTKBANK)	0.9%	1.0%	1.2%	1.5%	1.1%

Top companies by ROIC, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Yes Bank ($YESBANK)	9.8%	8.4%	8.4%	8.7%	9.0%
Axis Bank ($AXISBANK)	9.6%	8.9%	9.1%	8.8%	7.6%
Kotak Mahindra Bank ($KOTAKBANK)	6.8%	6.5%	7.1%	8.5%	7.3%
Lakshmi Vilas Bank ($LAKSHVILAS)	6.5%	7.5%	0.7%	6.1%	5.8%
South Indian Bank ($SOUTHBANK)	-	-	-	5.2%	5.4%
Median (23 companies)	7.6%	6.1%	3.2%	4.2%	3.8%
Karnataka Bank ($KTKBANK)	6.8%	10.2%	7.7%	10.4%	10.1%

Karnataka Bank stock price chart

Karnataka Bank financials

mln.	FY2010	FY2011	FY2012

Revenue	60,608	26,619	33,935
EBITDA	0.000	0.000	0.000
Net income	1,671	2,046	2,461
CAPEX	323.5	212.4	295.6
Debt	9,248	13,220	13,909
Cash	17,431	19,398	17,048

About Karnataka Bank

The Karnataka Bank Limited provides personal and business banking products and services in India. The company operates in four segments: Treasury, Corporate and Wholesale Banking, Retail Banking, and Other Banking Operations. It offers savings and current bank accounts, cash certificate, fixed deposits, cumulative deposits, insurance linked savings bank deposits, and resident foreign currency accounts; and education loan schemes, home loans, car finance schemes, and schemes for salaried persons. The company also provides working capital finance, term loans, and infrastructure finance; and various business finance products, such as retail trade finance, project finance, export finance, and agriculture finance, as well as finance for small, medium, and large scale industries. Further, the company provides debit, gift, and travel cards; insurance, depository participant, and money transfer services; ATM, Internet, and mobile banking services; and mutual fund products, as well as NRI services. As of June 30, 2014, it operated 612 branches and 728 ATMs. The company was incorporated in 1924 and is headquartered in Mangalore, India.