Axis Securities maintains Buy on Karnataka Bank, target price Rs 270

Axis Securities has maintained a Buy call on Karnataka Bank with a target price of Rs 270. The current market price of Karnataka Bank Ltd. is Rs 199.2. Karnataka Bank, incorporated in 1924, has a market cap of Rs 7501.66 crore.

Karnataka Bank's key products/revenue segments include Interest & Discount on Advances & Bills, Income From Investment, Interest and Interest On Balances with RBI and Other Inter-Bank Funds for the year ending 31-Mar-2024.

Financials

For the quarter ended 31-03-2025, the company has reported a Consolidated Total Income of Rs 2680.10 crore, up 5.43% from last quarter Total Income of Rs 2542.02 crore and up 2.30% from last year same quarter Total Income of Rs 2619.97 crore. The bank has reported net profit after tax of Rs 252.62 crore in the latest quarter.

Investment Rationale
With investments made and strengthening processes and teams ripe to yield results, Axis Securities expects Karnataka Bank to resume its growth journey, though gradually from FY26E onwards. Focus on granular retail deposits, particularly CASA deposits, remains unabated. We believe KTKBANK has multiple levers in place to protect and improve its margins over the medium term, thereby enabling the bank to improve RoAs. With a majority of the investments already made, Opex growth is expected to remain modest, driving cost ratios downwards. The brokerage expects RoA/RoE to remain at 1.1-1.2%/10-13% over FY25-27E, driven by the aforementioned factors. Growth delivery on guided lines, and sustenance remain key levers for a meaningful re-rating in the stock. Axis Securities maintains a BUY recommendation on the stock on inexpensive valuations. They value the stock at 0.75x FY27E ABV to arrive at a target price of Rs 270/share, implying an upside of 38% from the CMP.