Karur Vysya Bank's (KVB) shares hit a new high of ₹152 on Wednesday, marking a 33% increase in 2023 and nearly 60% year-on-year (YoY), buoyed by record third-quarter profits. The bank's strong performance and positive outlook have outperformed the benchmark Nifty 50 and sparked bullish sentiments among brokerages.
The bank reported a net profit of ₹378 crore for the quarter, up by 51% YoY, with operating profit and net interest income (NII) growing by 12% and 11.45%, respectively. Despite the upcoming deposit repricing that may limit margins, HDFC Securities maintained an 'add' call on the stock and raised the target price to ₹150 per share.
However, the bank's net interest margins (NIMs) softened by 12bps quarter-on-quarter (QoQ) to 4.1%, offset by a moderate Marginal Cost of Funds Based Lending Rate (MCLR) hike. Emkay Global warned of potential risks from slower growth and faster Current Account Savings Account (CASA) decline but retained a 'buy' rating on the stock, making it their most preferred pick in the small-cap banking space.
Elara Securities underscored that loan growth, recovery from written-off accounts, and lower credit cost would be key to achieving the targeted return on assets (RoA) of 1.5%. The firm also noted that KVB's operational structure limitations could restrict improved returns until transformation efforts are seen.
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