Karur Vysya Bank: This lender has more than doubled investor wealth since July 2022; up 5x since COVID lows

Shares of private sector lender Karur Vysya Bank have given multibagger returns in just the last 4 months. Since July, the bank has soared over 106 percent to ₹92 currently, from ₹45 in June 2022.

In the 10 months of the current calendar year 2022, the stock has given positive returns in 6 of those and negative in the remaining 4 months. It has gained the highest in July, up 30.7 percent followed by in October (so far), up 23 percent. It also rose 17 and 18 percent in August and September, respectively.

Meanwhile, the stock fell the most in May, down 8 percent, followed by in February, down 5.5 percent.

Overall in 2022 YTD, the stock has risen 120 percent as against 16 percent rise in Nifty Bank and 2 percent rise in benchmark Nifty.

In the last 1 year, it has surged over 80 percent. Meanwhile, since its COVID- low of ₹18.15 witnessed on March 27, 2020, two days after the first nationwide lockdown was declared, the lender has soared 408 percent. This means its investors' wealth since then has climbed by 5 times in less than 3 years.

As of June 30, 2022, according to the shareholding pattern on BSE, late Rakesh Jhunjhunwala's shareholding stood at 3,59,83,516 equity shares or 4.50 percent in Karur Vysya Bank.

In the September quarter, the Tamil Nadu-based bank reported a 52 percent rise in net profit at ₹250 crore, compared to ₹165 crore in the same period in FY22. Its operating profit for the quarter under review came in at ₹572 crore versus ₹375 crore in the same quarter last year. Its net interest income (NII) rose 21 percent to ₹821 crore for the current quarter as against ₹680 crore for Q2 of previous year.

Net interest margin also improved to 4.07 percent during Q2 of FY23. During the quarter, the bank's credit portfolio surged by 15 percent YoY taking its advances at ₹61,846 crore. It said that credit off-take continues to improve both yoy and qoq terms aiding the growth of the advances portfolio.

Meanwhile, the bank's asset quality improved with gross NPA coming at 3.97 percent in Q2FY23 versus 7.38 percent in Q2FY22 and 5.96 percent in Q1FY23.

Continuing the recent gains, brokerage house Emkay Global retained its buy call on the stock and raised its target price of to ₹125 for the stock from ₹95 earlier. The new target price indicates an upside of 36 percent.

"The lender's business transformational journey, which started during the erstwhile MD’s tenure, has been further accelerated by the current management engaging in lateral hiring from large private banks, for strengthening the liability/asset business. Bank has also partnered with Fintechs, to plug operational and outreach gaps on the liability/asset front. We believe this could keep opex elevated, but would bring sustainability to its RoA, unlike in the past," said the brokerage.

Further, it added that factoring-in better than expected growth, margin trajectory and asset-quality outcomes, the brokerage has upgraded its earnings for FY23-25E by 5-13 percent and expects RoA/RoE at a high of 1.3 percent/15 percent in FY25E, seen only prior to 2013.

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