Karnataka Bank gets buy rating

In nine decades of its presence, Karnataka Bank Ltd (KBL) has built a network of 769 branches spread across India with 82 lakh customers and has the strongest presence in South India with 596 branches. It has forayed into general insurance business as a JV partner in Universal Sompo General Insurance. Regional banks are characterised by their lower CASA franchise, weak employee productivity and limited contribution from non-interest income. Compared to its peer banks, KBL has fared well with a superior CASA franchise (29 per cent in FY2017), better employee productivity, efficient cost management, steady non interest income and adequate capital consumption. With huge liquidity in terms of deposits, new management focuses on credit growth along with branch expansion. KBL’s vision 2020 targets the business turnover of `1.8 lakh crore by March 2020 with deposits of `1 lakh crore and advances of `80,000 crore to be driven by higher growth in the retail portfolio (targets 60 per cent of advances vs 53 per cent currently).

Broking firm: Kotak Securities Rating: Buy Closing price: `164.55