Karur Vysya Bank - To Sustain Leadership On RoA/RoE Within Mid, Small Private Banks Space: ICICI Securities

ICICI Securities Report

We hosted Karur Vysya Bank Ltd. for overseas NDR. The investors seem to have acknowledged the remarkable transformational journey of Karur Vysya Bank under the current management with steady growth and superior RoA.

The management explained the hard work behind the numbers, suggesting that superior performance / delivery on net interest margin, growth, asset quality and return on asset are structural and outcome of the multiple initiatives undertaken.

The bank acknowledged headwinds on systemic deposits growth, NIM and credit costs but explained the steps it is taking to mitigate the same. The bank has one of the lowest LDRs (83%) and one of the highest LCRs (185%), and thus, should sustain ~15% CAGR in loan for FY24–26E.

Karur Vysya Bank’s all-inclusive special mention account 1+2 (less than 0.5%) and net non-performing asset (<0.4%), being amongst the lowest, alongside its limited (<3%) exposure to unsecured retail, nourishes our confidence of benign credit costs.

Our estimates are unchanged. Overall, we expect Karur Vysya Bank to sustain its leadership on RoA/RoE within mid and small private banks space.

Maintain Buy with an unchanged target price of Rs 270, valuing the stock at ~1.6 times FY26E adjusted book value.

Key risk is slower-than-expected deposits growth impacting growth and NIM.

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