The stock of Karnataka Bank has not exactly outperformed like some of its larger peers or even some of the smaller banking peers. The stock has been a little undervalued of late and we believe the stock has the potential to rally from the current market price.
Fantastic results for the quarter ending Sept 30, 2021
The bank reported a very good set of quarter ending Sept 30, 2021. The net profits of the bank rose to Rs 125 crores from Rs 119 crores in the corresponding period of the last quarter. The net interest margin too expanded from 3.03% to 3.31%. Overall, the numbers were pretty good in the context of economic growth being witnessed.
The Business Turnover was placed at Rs 1,31,390 crore for the quarter ended 30.09.2021. The bank also introduced 2,288 service outlets with 857 branches, one Extension Counter, 952 ATMs and 479 recyclers across India as on 30.09.2021. All 36 e-Lobbies & 428 mini e-Lobbies empowered through Recyclers.
NPAs under control
The bank saw its net non performing assets reduce to 2.82% in the quarter ending Sept 30, 2021, as against 3.00% in the June quarter. The bank also has very effective risk management systems in place. Credit exposure above Rs 25 lakh are rated borrower-wise and credit facilities below Rs 25 lakh & all schematic advances including agri-credit proposals are rated under 'Pool based approach'. Also, 'KBL96' rating model is developed for all sanctions under digital journey. The bank also has enterprise level fraud risk management system (ELFRMS) to effectively control / prevent online suspicious transactions done by customers & other digital channel transactions.
Buy Karnataka Bank Stock, as the shares remain undervalued
The shares of Karnataka Bank are currently trading at a price to book of just 0.31 times and a price to earnings multiple of just 4 times one year forward price to earnings multiples. The bank has a strong networth and the dividend yield on the stock itself comes up to around the 3% mark. The stock is one of the most undervalued stocks from the banking sector. Once the stock grabs attention it has the potential to rally. The stock is a good bet for investors looking to invest with a time frame of 3 to 4 years. It also has a strong capital adequacy and strong networth. Buy the stock of Karnataka Bank, which should see growth being strong as the economic momentum continues.
A little cautious on the markets
We remain a little cautious on the markets with the Sensex at 58,000 points. We are advising investors to buy only small quantities as returns seen in 2021 will most certainly not be happening in 2022. It is time to buy only small quantities and avoid large scale exposure. Buying into the markets on declines would be a good strategy.
Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.