Buy Karnataka Bank; target of Rs 180: Centrum

Centrum's research report on Karnataka Bank

We retain Buy on Karnataka Bank (KBL) with TP revised lower to Rs180. Q4’18 results were ahead of our estimates on both revenue / earnings front. This is even as the quarter saw bank recognise entire of its stressed asset portfolio (following RBI Feb, 2018 circular) including SMA2 portfolio and divergence related accounts as slippages in Q4’18.

Outlook

Retain Buy with TP at Rs180 (valued at 1.1x FY20E ABV). The reduction to our target multiple follows likely compression in the near term earnings and thus the returns ratios. Key risks - Higher than expected loan-loss provisions or lower growth could impact earnings. For all recommendations report, click here

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