Buy Karnataka Bank; target of Rs 195: Axis Direct

Axis Direct's research report on Karnataka Bank

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. Credit costs have been higher in the last couple of quarters (1.5% in Q3FY18). Asset quality improved on decline in G/NNPAs and lower slippage ratio of 0.5%. Capital position remains stable with Tier I of 11.1%.

Outlook

We retain our buy rating while adjusting for higher provisioning in FY18E and FY19E and assign P/ABV of 1.05x FY20E arriving at a target price of Rs 195/-.