Tax expense erodes Karnataka Bank's Q3 net, up 11% only

Moneycontrol Bureau

Mangalore-based private sector lender Karnataka Bank's (KB) third quarter (October-December, 2012-13) net profit moderated to 11% year-on-year to Rs 80 crore on the back of increased tax expenses. However, the profit before tax gained 77% y-o-y to Rs 117 crore.

"Our net profit was hit due to the rise in tax expenditure," P Jayarama Bhat, MD & CEO, Karnataka Bank told moneycontrol.com.

"At the same time, we needed to provide for restructured assets at a higher rate of 2.7% as against 2% earlier. This was to comply with the RBI's new guidelines. We have also provided for the expected wage revision to avoid one time hit," he said.

During the quarter, the bank incurred a tax expenditure of Rs 37 crore as against a tax refund of Rs 637 a year back. This eroded the profit margin for the quarter. In July-September quarter, KB reported a 186% y-o-y jump in its net level.

"Tax expenses are actually back to the normal level. A write-back of tax does not happen every time. There is nothing to read much into it," said a banking expert on condition of anonymity.

The net interest income or the difference between interest earned and paid out, grew more than 21% to Rs 228 crore during the quarter ending December, 2012. Loans expanded nearly 18% to nearly Rs 24,000 crore.

Provisions against bad loans stood at Rs 37 crore compared with Rs 38 crore a year back. Gross non-performing asset (NPA) ratio improved to 3.30% compared with 4% a year ago. However, it was at 3.22% in the second quarter, FY13. Net NPA rato was at 2.19% as against 2.23% in Q3, FY13.

Karnataka Bank shares on Wednesday slided nearly 6% to close the day's trading at Rs 165 on NSE. In the last one year those scooted more than 100% on speculation that the old generation bank would be acquired by any larger bank although, the bank management repeatedly refuted any such possibility.

Also read: Buzzing Karnataka Bank: What lifts investors' mood

Capital adequacy ratio stood at 12.93% versus 12.17% in the previous quarter.

saikat.das@network18online.com

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