Karnataka Bank Ltd. share price target

We maintain SELL on the stock with a target of Rs 50/share (~0.25x FY23E ABV).

We have revised loan growth downwards and built in higher credit costs in FY22-23E. We downgrade the stock to a Sell from a Buy with a target of Rs 60/share (0.25x FY23E ABV).

Karnataka Bank (KBL) reported Net Profits of Rs 135 cr, higher than our estimate of Rs 119cr led by decline in Cost of Deposits (CoD) of 66/11bps YoY/QoQ to 5.4% and lower provisions of Rs 214cr, down 32/34% YoY/QoQ. NIM expanded by 43bps to 3.26% leading NII growth of 21/7% YoY/QoQ, even as yields

Q2FY21 was in-line with expectations with reported PAT at Rs 119cr vs. est. Rs 115cr. While loan growth was flattish, improvement in NIM to 3.08% on lower CoD, led NII growth of 15/7% YoY/QoQ. Deposits growth of 4% was led by CASA, up ~11%. CASA ratio improved to 29.2% from 27.4%, a year ago.

Earnings to remain muted in FY21. With an expected higher delinquency rate in H2 FY21, credit cost in the medium term is expected to be high. This and the weaker operating performance (attributed to slower business growth) would keep earnings weak in...

We have revised our estimates to factor in lower C-I and higher other income. We beleive inadequate CAR and high moratorium will weigh on the stock. We recommend a Sell with a TP of Rs 40 (0.22x FY22E ABV).

Karnataka Bank (KBL) reported a weak Q4FY20 performance with advances/ deposits growth at 3.9/4.9% YoY, opex growth of 29/42% YoY/QoQ and high morarotium of 47%. Asset quality improved slighlty with G/NNPAs at 4.8/3.1% vs 5/3.8% QoQ. Reported PCR improved to 64.7% compared to 59.3% QoQ.

Karnataka Bank (KBL) Q3FY20 performance was impacted by deteriorating asset quality and higher provisions. Slippages spiked to Rs637cr driven by four large accounts. Corporate book has declined with focus on mid-corporate and retail.

Karnataka Bank (KBL) second quarter performance was muted. Weaker NII growth and higher credit costs led to disappointing bottomline performance, down 5% YoY to Rs 106cr. Credit costs was up from 1.5% to 1.9% QoQ.

Karnataka Bank (KBL) reported soft operating performance with profitability supported by tax reversal. NII was muted at 3/6% QoQ/YoY on NIM pressure (2.8%) and loan growth slowdown on account of run-down in large corporate segment. Non Interest income was largely aided by treasury income.