Karnataka Bank stock climbs 6% on rise in Q2 profit

Shares of private sector lender Karnataka Bank gained over 6% intraday in Wednesday's early session a day after the company declared its Q2 earnings.

The lender reported a profit of Rs 119.44 crore in Q2FY21 registering a rise of 12.7% YoY against Rs 105.91 crore in the same period last fiscal. Karnataka Bank's profit after tax plunged 39.2% QOQ. The bank's moratorium book declined from 51.12% in Q1FY21 to 11.40% in Q2FY21. Its net interest income increased to Rs 575 crore from Rs 498.7 crore YoY.

Karnataka Bank share price touched an intraday high of Rs 44.55, rising 6.07% as against the last close of Rs 42 on BSE. The stock opened with a gain of 3.1% today at Rs 43.30 and also touched an intraday low of Rs 43.10. Karnataka Bank stock has gained 7.79% in the last 4 days of consecutive gains. The stock price of Karnataka Bank touched a 52-week high of Rs 74.99 on February 14, 2020, and a 52- week low of Rs 34.50 on 29 May 2020.

Market cap of the firm stood at Rs 1,353 crore as of today's closing session. Karnataka Bank share trades higher than 5, 20, 50 and 100-day moving averages but lower than 200-day moving averages.

The business turnover of the bank touched Rs 1,27,021.51 crore as on September end, registering a 2.72% growth on a year-on-year basis.

Deposits grew from Rs 70,189.65 crore to Rs 72,922.58 crore and advances grew from Rs 53,468.42 crore to Rs 54,098.93 crore, Karnataka Bank said in a regulatory release.

Total income rose to Rs 1,933.52 crore in the quarter under review, against Rs 1,902.41 crore in the same period of 2019-20.

The bank's gross non-performing assets (NPAs) fell to 3.97%  from 4.78% in the year-ago period.

Karnataka Bank's managing director Mahabaleshwara MS said, "The Bank has been successful in withering away the impact of Covid-19 pandemic as the retail and mid corporate advances have also grown at 8.53% and 16.52%, respectively and share of CASA deposits also rose to 29.17% of total deposits."

Expressing views on the Q2 earnings, Jaikishan Parmar - Sr. Equity Research Analyst, Angel Broking said,"Karnataka Bank reported a mixed set of numbers for Q2FY21. Advance largely remained stable YoY and QoQ, growth primarily comes from retail and mid-size corporate. Management Indicated for FY21 advance would remain stable, retail and mid-size corporate book would grow but the large corporate book to decline. NII grew at a healthy rate of 15% YoY and 7% QoQ, compared to stable advance growth. Sequentially NIM improved 19 bps and YoY jumped by 26bps to 3.08%. Improvement in NIM primarily led by a decline in the cost of funds."

"The aggregate COVID-19 provision of Rs 97.99 crore has been continued in Q2FY21. The COVID provision is less compared to other banks. Currently, Karnataka Bank is trading at 0.22x of trailing book value, Which is lower compared to the historical average. Almost no growth in advance for the last 6 quarters, low CAR ratio, and Moderate RoE for Many quarters could be the reason for depressed valuation. The stock would consolidate till the investor get clarity on restructuring percentage from the moratorium book," he added.

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