Emkay's research report on Karur Vysya Bank
KVB continued with its superlative performance in 4Q, led by healthy credit growth (17% YoY), better core margins @4.2% (+6bps QoQ adjusted for oneoff recovery in 3Q), and NNPA ratio being one of the lowest among peers at 0.4%. This, coupled with higher other income and partly offset by higher staff cost/provisions led to a strong 26% PAT beat at Rs4.6bn/1.8% RoA. Management reiterated its focus on profitability (~1.6% RoA) vs growth. Bank has scaled up its co-lending business with 5% FLDG, to cover any potential risk, whereas its BNPL sourcing with Amazon is trending well and should thus support risk-adjusted margins in the long run. Bank has also created floating provisions of Rs1bn/13bps of loans to withstand any unforeseen initial asset quality impact. Factoring in the better margins/fees and the contained LLP,
Outlook
we expect KVB to continue delivering superior RoA/RoE at 1.5-1.7%/16-17% over FY25-27E and thus calling for further re-rating. We retain BUY on KVB, hoisting up TP to Rs250/sh, at 1.5x FY26E ABV (earlier 1.2x Dec-25E ABV).
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