INSUBCONTINENT EXCLUSIVE:
ETMarkets.com|Nov 22, 2018, 03.37 PM ISTThe current market price of Karnataka Bank is Rs 102.60.Axis Securities has a buy call on Karnataka
Bank with a target price of Rs 136.
The current market price of Karnataka Bank is Rs 102.60.
Time period given by the brokerage is one year
when Karnataka Bank price can reach the defined target
Investment rationale by the brokerageQ2FY19- Mixed operational performance: KBL reported a mixed performance for Q2FY19
NIM pressure, increase in slippages were disappointing, but strong loan growth with increasing share of high rate portfolio and reduction in
stressed asset portfolio is comforting
NII growth was muted at 6 per cent YoY even as loans grew 22 per cent
Cost of funds at 5.94 per cent was up 6bps QoQ (vs
5bps QoQ rise in yield on advances)
Growth in fee income was healthy at 20 per cent YoY even as non-interest income growth lagged
Operating profit at Rs 356cr declined 3 per cent YoY
Slippages moved up slightly to 2.95 per cent from 2.26 per cent QoQ
Credit costs have come down to 1.5 per cent from 2.2 per cent a year ago which aided PAT growth of 20 per cent to Rs 112 crore.
Outlook:
Guidance of +20 per cent growth in FY19 given by the management remains
We expect better revenue traction to come from improving retail proportion, which coupled with controlled opex will aid operating profit
growth, but elevated credit cost on account of low PCR will cap earnings for the bank
We feel the stock is quoting at attractive valuations of 0.7xFY20 P/ABV and retain BUY on KBL with a target price of Rs 136 (0.9x FY20
P/ABV).
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