Target: ₹200

CMP: ₹183.70

Karur Vysya Bank continued with its superlative performance, led by healthy credit growth, higher margins (up 25 bps q-o-q, including 19 bps from one-off lumpy corporate recovery), and steady improvement in asset-quality performance (the GNPA ratio was down 15 bps q-o-q to 1.6 per cent), leading to an 8 per cent PAT beat at ₹410 crore (Emkay est. ₹380 crore).

However, staff costs were significantly high due to the bank’s continued business expansion and recent wage revisions. As per management, investment in AIF stood at ₹11 crore with no step-down exposure and, thus, no need to make any provisions. Management reiterated its focus on sustainably delivering higher profitability (>1.5 per cent RoA) instead of chasing growth.

We expect Karur Vysya Bank to register its decadal best RoA/RoE at 1.5/16 per cent in over FY24-26, led by healthy NIM/fees and contained LLP. We retain our Buy rating on KVB with a revised TP of ₹200/share (vs. ₹185/share), rolling forward to 1.3x Dec-25E ABV.

Key risks: Slower-than-expected growth, a faster decline in CASA leading to cost pressure, and a resurgence of NPAs in the retail/SME sector due to macro-dislocation.