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INVESTMENT INSIGHTS

Check Before You Invest : The Karnataka Bank Ltd

BSE: 532652 NSE: KTKBANK ISIN: INE614B01018
  |   Sector:  BFSI   |   Industry:  Bank - Private

Snapshot

Q.1 Which industry/sub-sector does The Karnataka Bank Ltd belong to?
The Karnataka Bank Ltd belongs to the BFSI sector, operating specifically within the Bank - Private segment.
Q.2 Is The Karnataka Bank Ltd a good quality company?
The Karnataka Bank Ltd is a weak quality company, based on a inconsistent multi-year financial track record.

This assessment is based on the bank’s performance on Total Income growth, Pre-Provision Operating Profit, RoA, RoE, CAR, and Asset Quality, along with how these metrics compare with its long-term averages.

Q.3 Is The Karnataka Bank Ltd undervalued or overvalued?
The Karnataka Bank Ltd appears Somewhat overvalued, as its key valuation ratios are higher than their past averages.

Based on the industry it operates in, the relevant valuation ratios include one of the following, P/E, P/BV, P/Sales, EV/EBITDA or a combination of two or more.

Valuation Ratios Current 5-year
Historic Median
Price to Earnings 7.82 5.52
Price to Book 0.81 0.63
Price to Sales 1.15 0.77
EV to EBITDA 2.36 1.79
Q.4 Is The Karnataka Bank Ltd a good buy now?
The Karnataka Bank Ltd is a good buy now, based on strong price trend analysis suggesting prices may rise. However, you need to check its quality and valuation before making a decision

Performance Analysis

We have analysed the performance of the company on the following:

  • How has it performed on generating Profits?

    By checking its Total Income growth, NIM, PPOP, RoA and RoE compared to its last 5-year median.

  • How efficiently has it grown and managed operations?

    By checking its Total Asset growth and Cost-to-Income ratio.

  • How strong is its Capital position and Asset Quality?

    By checking its Capital Adequacy Ratio (CAR), GNPA and NNPA.

A: What are the trends in income and profitability?

Q.1 Total Income growth of The Karnataka Bank Ltd?
The Karnataka Bank Ltd Total Income growth is 6.92% for FY-2025, which is above its 5-year CAGR of 5.86%, indicating faster growth.

Q.2 Return on Assets of The Karnataka Bank Ltd?
The Karnataka Bank Ltd Return on Asset is 1.1%, which is in line with its 5-year historical median of 1.1%, indicating stable earnings on assets.
Current Level 5-year
Historic Median
NIM (%) 3.04 3.04
PPOP (%) -15.88 -1.63
RoA (%) 1.1 1.1

Q.3 Return on Equity (ROE) of The Karnataka Bank Ltd?
The Karnataka Bank Ltd Return on Equity is 11.6% for FY-2025, which is in line with its 5-year historical median of 11.6%, indicating the business is making similar use of its shareholders capital.

Q.4 Pre-provisioning operating profit margin of The Karnataka Bank Ltd?
The Karnataka Bank Ltd Pre-provisioning operating profit margin, which is the bank’s core operating profit before provisioning for bad loans, is -15.88% for FY-2025, which is below its 5-year median(-1.63%), indicating decreasing margins.

Q.5 Net Interest Margin of The Karnataka Bank Ltd?
The Karnataka Bank Ltd Net Interest Margin, which is the difference between the rate of interest earned on assets and the rate of interest paid on liabilities, is 3.04% for FY-2025, which is in line with its 5-year median( 3.04%), indicating stable margins.

Q.6 Does its ROIC exceed its WACC?
The Karnataka Bank Ltd return on invested capital (ROIC) is 35.97% for FY-2025, is higher than its estimated weighted average cost of capital (WACC) of 13.5%, indicating value creation.

B: Does the bank grow efficiently and manage its operating costs?

Q.7 Total Asset growth of The Karnataka Bank Ltd?
The Karnataka Bank Ltd Total Asset growth is 4.2% for FY-2025, which is below its 5-year CAGR of 7.74%, indicating slower growth.

Q.8 Cost to Income ratio of The Karnataka Bank Ltd?
The Karnataka Bank Ltd Cost to Income ratio which represents the cost incurred for every Rs.100 earned is 60.1% for FY-2025, is higher its historical 5-year median of 52.6%, indicating improved cost management.

C: How strong is the bank’s capital position and asset quality?

Q.9 Capital Adequacy ratio of The Karnataka Bank Ltd?
The Karnataka Bank Ltd Capital Adequacy ratio (CAR) is 19.9% for FY-2025, which is above the regulatory requirement of 12%, indicating strong capital position.

Q.10 Asset Quality of The Karnataka Bank Ltd?
The Karnataka Bank Ltd Gross Non-Performing Assets, which are loans overdue by more than 90 days, is 3.08% for FY-2025, which is below its 5-year median 3.74%, while Net Non-Performing Assets, which is GNPA minus provisions made for bad loans is 1.31% which is below its 5-year median( 1.7%), indicating improving asset quality.

Ownership & governance

D: Promoter shareholding and pledge status of The Karnataka Bank Ltd?

Q.1 Promoter shareholding and pledge status of The Karnataka Bank Ltd?
Promoters hold 0.00% of the The Karnataka Bank Ltd, with 0.00% of their stake pledged, indicating no pledge risk.

Peer comparison (industry-wise, mcap)

E: How does The Karnataka Bank Ltd performance compare with that of its Peers?

Q.1 AUM Growth of The Karnataka Bank Ltd vs Industry Peers?
The Karnataka Bank Ltd AUM CAGR is 7.74%, compared to the 5-year industry median CAGR of 13.65%, indicating slower growth and losing its market share.

Q.2 Profit metrics (NIM, PPOP, RoA) of The Karnataka Bank Ltd vs industry peers
The Karnataka Bank Ltd profit metrics are in line with the industry median level of 7.55%, indicating similar profitability compared to peers.
Profit Metrics
Current Level 5-year
Industry Median
NIM (%) 3.04 3.73
PPOP (%) -15.88 17.81
RoA (%) 1.1 1.1

Q.3 Operating efficiency of The Karnataka Bank Ltd vs industry peers?
The Karnataka Bank Ltd Cost to Income (51.35) is below the industry median of (61.3); while the current ROE (11.6) are in line with than the 5-year average Industry ROE (12.2). This shows that the business is positioned in the middle quartile of the industry.
Operating Efficiency
Current Level 5-year
Industry Median
NIM (%) 3.04 3.73
PPOP (%) -15.88 17.81
RoA (%) 1.1 1.1
Cost to Income (%) 60.1 61.3
ROE (%) 11.6 12.2

Valuation & price assessment

Q.1 Stock return of The Karnataka Bank Ltd over the last decade?
Over the last 9 years, the stock has delivered a CAGR of 11.6% based on the current price.
9Y 5Y 3Y 1Y
Share Price
CAGR		 11.6% 30.7% 24.5% 35.2%
Q.2 How do the current valuation ratios compare with 5-year historical median and industry numbers?
Valuation Ratios Current 5-year
Historic Median		 5-year
Industry Median
Price to Earnings 7.82 5.52 13.38
Price to Book 0.81 0.63 1.38
Price to Sales 1.15 0.77 1.77
EV to EBITDA 2.36 1.79 7.70
Q.3 Valuation ratios of The Karnataka Bank Ltd vs historical and industry averages?
The current Price-to-Book (P/B) ratio of 0.81 is higher than its historical median of 0.63, indicating that the stock is trading above its historical average valuation.

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