Karur Vysya Bank: This private sector bank has doubled investor wealth in Just 90 days; How to play it now?

In the last two months, banking stocks have turned into favourite stocks for investors, as evidenced by the Bank Nifty, which is currently trading near an all-time high. Banking stocks suffered hugely between April and June from the relentless selling by the FPIs.

However, following the release of the June quarter results, investors turned bullish on the banking sector, and global brokerages have raised their target prices for the majority of the stocks. Nearly 70% of the Bank Nifty's stocks are currently trading near their 52-week highs.

Karur Vysya Bank shares have risen 106.30 percent in the last three months, with the majority of the gains coming in the last month after the bank reported a two-fold increase in net profit.

Shares of the private sector lender have rallied nearly 36% in the last month, which is 31.44 percent higher than the Bank Nifty, which returned 4.56 percent in the same period.

On July 25, Karur Vysya Bank announced a 110 percent year-on-year increase in net profit to ₹229 crore for the first quarter of the fiscal year, up from ₹109 crore in the previous fiscal. Total income during April-June 2022-23 rose to ₹1,672.6 crore from ₹1,595.9 crore in the same quarter of the previous fiscal year.

Net interest income for the June quarter stood at ₹746 crore, up from ₹638 crore the previous year. The bank's gross non-performing assets came in at 5.21 percent of the gross advances, down from 7.97 percent at the end of June 2021. Bad loans fell from 3.69 percent to 1.91 percent during the same period.

Further, the bank's provisions for bad loans and contingencies came down to ₹154.64 crore in the June quarter from ₹247.37 crore in the year-ago period.

After a solid Q1 result, domestic brokerage firm HDFC Securities raised its target price to ₹69.72/share in its research report dated July 27, 2022. According to HDFC Securities, KVB is incrementally focused on driving granular growth (LAP, commercial banking, and other retail) and has confidently guided for a 15% loan growth during FY23.

The brokerage firm said that with a steady NIM trajectory and an improving line of sight on lower credit costs, "We see KVB gradually regaining confidence in loan growth and steadily sustaining its core ROAs at over 1%," said the brokerage firm. It has raised FY23/FY24E earnings estimates by 4%/6% to factor in stronger loan growth, partly offset by lower treasury income.

On the other hand, Emkay Financial Services, on August 31, gave a "buy" call on the stock with a target price of ₹95/share. According to brokerage, "with asset quality stress and concerns about management stability and credibility now largely behind it, Karur Vysya Bank (KVB) is on track to regain its mojo, led by accelerated growth and reclaiming the > 1% RoA (return on assets)."

Meanwhile, in the second week of September, Karur Vysya bank opened its first high-net-worth individual branch in Hyderabad. This will be the 792nd branch exclusively for retail assets and personal banking services.

Karur Vysya Bank is a privately held Indian bank, headquartered in Karur in Tamil Nadu. The bank operates in four business segments: treasury operations; corporate and wholesale banking operations; retail banking operations; and other banking operations. The bank's investments are categorized into three categories: held to maturity, held for trading, and available for sale.

An average of 11 analysts polled by MintGenie have a 'buy' call on the stock.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.