- Karnataka Bank shares rose more than 7% to ₹122 apiece on the BSE, trading around 3-year high
Shares of Karnataka Bank continued their bullish momentum with the stock surging for the second straight day on Thursday after reporting an all-time high profit during the second quarter of the current fiscal year or Q2 FY23. Net profit soared to ₹412 crore, its all-time high, in the quarter ended September 30, from ₹126 crore a year earlier.
The lender’s CEO Mahabaleshwara MS attributed the significant jump in net profit to improved earnings, improved asset quality, healthy growth of advances, cost containment, and efficiency enhancement, among others.
Karnataka Bank shares rose more than 7% to ₹122 apiece on the BSE in early deals, trading around 3-year high. The bank stock has gained more than 30% in the last three sessions whereas, it has surged more than 90% in 2022 (YTD) so far.
“A steep rise in margins and negative provisions led to Karnataka Bank’s Q2 strong profitability, with its RoA at 1.7%. With most pandemic related stress already recognised/re-structured, the focus now shifts toward growth. Key positives were 1) strong traction in retail loans, 2) moderation of slippages and 3) strong margin improvement. With credit growth picking up and moderating credit costs, earnings are expected to normalise in the medium term,” said domestic brokerage and research firm Anand Rathi.
The brokerage house has upgraded its rating of the private banking stock to a Buy, with a higher November 2023 target price of ₹140 per share.
The net interest margin grew by 47 bps in Q2 FY23 to 3.78%. “We expect NIM to stabilise near 3.5%. We are working with a 190bp credit cost for this year, to account for a tail risk from accelerated slippages in the restruc-tured book. We expect credit costs to moderate in a couple of quarters, leading to normalisation in RoA,” the note added.
The NPAs also moderated as the gross non-performing asset(GNPA) went down to 3.36% against 4.03% in the June quarter while NNPAs or gross non-performing assets also reduced to 1.72 % against 2.16% as of 30th June, 2022.
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