Buy Karur Vysya Bank; target of Rs 265: Asit C Mehta

Asit C Mehta report on Karur Vysya Bank

Karur Vysya Bank reported its Q2FY25 results broadly in line with our estimates with a slight upward beat on advances/deposits/profitability. The CASA growth remained a miss for the bank due to low momentum in CASA accounts and depletion of balances in the existing accounts. While the bank is replacing its lower yielding corporate loans with the higher yielding segments, its margins have sustained above the earlier guidance of remaining above 4% which is expected to sustain in the coming quarters as well. Owing to increasing costs of deposits and flattish rise in yields in incremental loans, net interest income increased by 3.5% QoQ/15.8% YoY (1.2% above our estimate) leading to a PAT growth of 3.3% QoQ/25.1% YoY (3% above our estimates).

Outlook

We continue to remain positive on the growth prospect of the bank and expect KVB’s NII/PAT to grow at 15.3%/24.3% CAGR over FY24-27E with ROA to remain at 1.8% in FY26E. We maintain Buy rating on KVB with a target price of Rs 265, valuing the bank at 1.7x of its Sept’26 Adj. BV.