Feature

In search of velocity

Karnataka Bank is trying to accelerate organic growth but can it avoid being taken over?

Soumik Kar

When Polali Jayarama Bhat secured a first rank in MSc (chemistry) from Mysore University in 1972, he never imagined that he would end up a career banker. But as fate would have it, after dabbling for three months as a lecturer in a government college, Bhat got a break in Karnataka Bank as a probationary officer in 1973. And it seems the chemistry has since worked well for the 62-year-old, who after spending close to four decades is today at the helm of the bank, overseeing assets around ₹66,000 crore. Incidentally, Karnataka Bank, which went public in 1995, has the unique distinction of being the only listed private sector bank from the South Kanara region — the rest have either been nationalised or merged. Interestingly, Karnataka Bank itself has a history of M&A, taking over three regional banks in the 1960s. Today, after 90 years of its existence, the bank boasts of 561 branches, a lending book over ₹27,000 crore and deposits of close to ₹39,000 crore. 

However, over the past decade or so while the bank’s net profit has grown at 8%, the absence of a dominant shareholder and its strong regional presence have occasionally kept rumour mills active about the bank either being merged or acquired. Can the bank then hold on to its independent legacy? The question is particularly pertinent given that for a whole host of conglomerates and non-banks eagerly waiting to grab new bank licences, strong regional players such as Karnataka Bank make for a suitable match. For Bhat, though, selling out is clearly not an option. “I have said in various forums that we are not a bank to be acquired. We are resisting anybody’s efforts to acquire our bank and it is not possible also as the shares are widely held,” says Bhat stoically, sitting out of the bank’s soberly decorated regional HQ in Mumbai.

But as it turns out, in the case of Karnataka Bank, things may be coming to a point where a potential merger may simply become inevitable. If and when that comes through, it will be a welcome change for investors who have got nothing out of the bank except stable dividends. Over the past 10 years, the bank’s share price has remained stagnant. While the bank has given an average dividend of 38% over the past 10 years, its current yield amounts to 4%. The past decade might have been miserable for investors but lets delve into why Karnataka Bank really matters.

unsub

You don’t want to be left behind. Do you?

Our work is exclusively for discerning readers. To read our edgy stories and access our archives, you’ve to subscribe