We Think Shareholders Are Less Likely To Approve A Pay Rise For The Karnataka Bank Limited's (NSE:KTKBANK) CEO For Now

Simply Wall St
August 26, 2021
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Shareholders of The Karnataka Bank Limited (NSE:KTKBANK) will have been dismayed by the negative share price return over the last three years. However, what is unusual is that EPS growth has been positive, suggesting that the share price has diverged from fundamentals. The AGM coming up on the 02 September 2021 could be an opportunity for shareholders to bring these concerns to the board's attention. They could also try to influence management and firm direction through voting on resolutions such as executive remuneration and other company matters. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

Check out our latest analysis for Karnataka Bank

How Does Total Compensation For M. Mahabaleshwara Bhat Compare With Other Companies In The Industry?

Our data indicates that The Karnataka Bank Limited has a market capitalization of ₹16b, and total annual CEO compensation was reported as ₹12m for the year to March 2021. We note that's an increase of 27% above last year. We note that the salary portion, which stands at ₹8.60m constitutes the majority of total compensation received by the CEO.

On comparing similar companies from the same industry with market caps ranging from ₹7.4b to ₹30b, we found that the median CEO total compensation was ₹16m. This suggests that Karnataka Bank remunerates its CEO largely in line with the industry average. Moreover, M. Mahabaleshwara Bhat also holds ₹896k worth of Karnataka Bank stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component20212020Proportion (2021)
Salary ₹8.6m ₹6.5m 74%
Other ₹3.1m ₹2.7m 26%
Total Compensation₹12m ₹9.2m100%

On an industry level, around 84% of total compensation represents salary and 16% is other remuneration. Karnataka Bank sets aside a smaller share of compensation for salary, in comparison to the overall industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

NSEI:KTKBANK CEO Compensation August 27th 2021

The Karnataka Bank Limited's Growth

The Karnataka Bank Limited has seen its earnings per share (EPS) increase by 3.4% a year over the past three years. It saw its revenue drop 6.2% over the last year.

We would prefer it if there was revenue growth, but the modest improvement in EPS is good. These two metrics are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has The Karnataka Bank Limited Been A Good Investment?

Few The Karnataka Bank Limited shareholders would feel satisfied with the return of -48% over three years. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Shareholders have not seen their shares grow in value, rather they have seen their shares decline. A huge lag in share price growth when earnings have grown may indicate there could be other issues that are affecting the company at the moment that the market is focused on. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. The upcoming AGM will be a chance for shareholders to question the board on key matters, such as CEO remuneration or any other issues they might have and revisit their investment thesis with regards to the company.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 2 warning signs for Karnataka Bank that investors should think about before committing capital to this stock.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.

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