ICICI Securities Recommends 'Buy' on Karur Vysya Bank, Sets Ambitious Target of Rs 267 Amidst Strong Performance

In a significant boost for investors, ICICI Securities has reiterated its 'Buy' recommendation on Karur Vysya Bank (KVB), setting an ambitious target price of Rs 267. This confident outlook comes on the heels of the bank's stellar performance in the fourth quarter of the financial year 2024, which has painted a picture of robust growth and strengthening financial health.

KVB's Q4 FY24 results have truly impressed, with the bank reporting a substantial 30% year-on-year surge in Profit After Tax (PAT), reaching Rs 378 crore.

This impressive bottom-line growth was underpinned by a healthy 15% year-on-year increase in Net Interest Income (NII), which stood at Rs 924 crore. The bank also showcased improved operational efficiency, with Net Interest Margin (NIM) expanding to 4.19%, a gain of 6 basis points quarter-on-quarter and 10 basis points year-on-year, signaling enhanced profitability from its core lending activities.

Perhaps one of the most compelling aspects of KVB's recent performance is the significant strides made in asset quality.

The bank successfully brought down its Gross Non-Performing Assets (GNPA) to a mere 1.40%, a remarkable reduction of 53 basis points sequentially and a substantial 192 basis points year-on-year. Similarly, Net Non-Performing Assets (NNPA) saw a decline to 0.37%, down 13 basis points QoQ and 60 basis points YoY, reflecting effective risk management and recovery efforts.

Furthermore, the provision coverage ratio (PCR) stood strong at 74%, indicating a comfortable cushion against potential future loan losses.

Beyond asset quality, KVB demonstrated robust business expansion across key metrics. Its advances grew by a healthy 13% year-on-year, reaching Rs 70,683 crore, while deposits also saw an impressive 11% year-on-year increase, totaling Rs 92,109 crore.

The bank's Current Account Savings Account (CASA) ratio, a crucial indicator of a stable and low-cost funding base, remained solid at 31.9%. Moreover, KVB's capital adequacy remains exceptionally strong, with CET1 at 15.06% and total CRAR at 18.06%, providing ample capital for future growth and resilience.

ICICI Securities highlights several key factors supporting their optimistic stance.

They emphasize the consistent improvement in asset quality, which is expected to drive a sustainable earnings trajectory. The brokerage firm also points to KVB's robust liability franchise and comfortable valuation at 0.9x FY26E ABV, suggesting that the stock is undervalued and ripe for a re-rating.

With a clear path towards improved profitability and a strong balance sheet, Karur Vysya Bank appears well-positioned to deliver significant value to its shareholders.