LKP Securities sees 32% 1-year return on Karnataka Bank shares
Mar 26, 2024
New Delhi [India], March 26 : Brokerage and financial advisory firm LKP Securities has given "buy" ratings to potential investors for the stock of The Karnataka Bank.
The brokerage sees a "favourable risk reward" in the said bank.
Over the past year, the bank's shares rose by about 78 per cent. In 2024, they have, however, declined a little over 3 per cent. On Tuesday closing, the shares of the bank were 0.7 per cent lower at Rs 230.
The 12-month target is pegged by LKP Securities at Rs 304, with a potential return on investment of 32 per cent.
According to the brokerage house the, The Karnataka Bank is witnessing structural transformation under new management, which has taken various steps in the previous year.
"The reorganization of several departments, making robust underwriting process and cross selling opportunities are few of them," it said in a note.
"The bank has a mediocre track record. The period of FY14-20 was stressed period of the bank, whereas FY05-13 was a stable period."
Post-Covid, the bank has been witnessing slower growth because of structural changes, the brokerage noted, citing the change in key management team that has changed over the past two years.
The bank is poised for a growth rejuvenation aided by comfortable loan-to-deposit ratio (74 per cent as on 3QFY24) and ample liquidity (Liquidity Coverage Ratio of 266 per cent).
"In near term, the major growth is expected to come from AA and AAA rated corporate loans. However, retail loan pick up would take time as organization changes are in progress and implementation process (cannot be quantified) will be sooner than expected," LKP Securities said.
"The improving growth, efficiency, and profitability may drive a re-rating for the bank as it trades below its book value (trailing P/B of 0.9x). We are recommending BUY given a favorable risk reward."
According to the bank's website, which has been active since 1924, it has over 13 million customers, over 8,500 employees, and 915 branches.
