Karnataka Bank Ltd. share price target

We retain Buy on Karnataka Bank (KBL) with TP unchanged at Rs180. Q1'19 results, albeit lower to our estimates on revenue front, were inline on both operational and profitability end. Slippages came in lower (2.3% of loans); provisions included accelerated coverage on NCLT cases (76% vs. 48% QoQ). Segments of MSME and corporate banking have shown signs of improvement; we expect traction therein to continue. Stressed asset pool has reduced to 3.8% of loans; we see loan loss provisions to remain contained at 120bps. We expect earnings growth to accelerate...

Q4FY18 has been remained challenging for banking industry and Karnataka Bank Ltd. (KBL) is no exception as the RBI released strict norms during Feb'2018 in order to fasten the pace of NPAs recognition and resolution of stressed assets. KBL has recognized outstanding SDR exposure of Rs1.9bn and S4A exposure of Rs3.44 bn as NPAs in Q4FY18. Provisioning against NCLT a/c of worth Rs3.19 bn (already recognized as NPA) increased to Rs1.64 bn with PCR increased to 53% v/s ~27% in previous quarter. Furthermore, the bank recognized MTM losses on investment portfolio despite RBI's dispensation on spreading the losses across next four...

NII grew to Rs. 541.51 Cr in Q4FY18 compared to Rs. 451.48 Cr in Q3FY18. Karnataka Bank Ltd Q4FY18 results Comment

Karnataka Bank (KBL) reported a robust operational performance in Q3FY18 with 20%YoY jump in NII supported by NIMs (up 25bps) and loan growth (24% YoY). Rise in other income by 46% led to better PAT even as higher provisioning (though lower from Q2FY18) continued.

Q3FY18 Result Analysis: Net interest income increased by 19.9% YoY and 2.6% QoQ in Q3FY18 (10.8% YoY and 3.7% QoQ inQ2FY18). Though interest income grew by 0.6% YoY amidst the implementing strategy to maintain competitive MCLR rate, this offset by (-)7.0% YoY decline in the interest cost despite the decline in low cost deposits as rationalization of deposits rates benefitted the bank on this front. Thereby NIM which improved by 6bps QoQ to 3.09% was mainly driven by the robust growth in NII. Owing to the (-)4.2% decline in operating expenditures, cost-to-income (C/I) ratio reduced to 50.2% in the...

We retain Buy on Karnataka Bank (KBL) and revise our TP upwards to Rs240 (valued at 1.3x FY20E ABV). Q3'18 results surprised on upside with a) strongest ever loan growth (24.1% YoY / 8% QoQ) ; b) further expansion in margins (3.04%; 25bps YoY) c) decline in slippages-run rate (1.9% annualised) and d) stressed asset portfolio down to 7%. Commentaries on each of the above key parameters remain encouraging and we have factored the same into our estimates. This is even as near-term earnings are set to remain under-pressure following accelerated provisions. We have introduced FY20 estimates and see our RoE's...

Karnataka Bank (KBL) operating parameters were strong on all fronts with loan growth acceleration, margins improvement, strong fee income growth and moderation in slippages. Commentaries on each of the above key parameters remain encouraging.

Assets quality remains stable: Gross slippage at Rs3,740 mn showed improvement with slippage rate declined to 0.98% (1.35% in previous quarter). During the quarter 1 SDR a/c of housing infra sector of worth Rs2,300 mn was downgraded to NPA and management asserted of carrying adequate provision against it. During the quarter, R&U; remained at Rs3,490 mn leading to net addition of Rs250 mn of GNPAs during the quarter and GNPA ratio reduced by 22 bps to 4.13% v/s 4.34% in previous quarter. Stressed assets (GNPA + watch list) reduced to 7.5% v/s 8.9% in Q1FY18. Substandard NPAs represented around 51.3% of GNPAs in Q2FY18 v/s...