Target: ₹360
CMP: ₹304.55
Karur Vysya Bank has reported a robust quarter, achieving a return on assets (RoA) of 2.1 percent. This performance is attributed to a 26 basis points quarter-on-quarter expansion in net interest margin (NIM), along with healthy recoveries over the past two quarters and a 5 percent year-on-year reduction in operational expenditure (opex). Additionally, the bank has set aside ₹160 crore in contingent provisions for identified sectors.
Management has projected NIMs for FY27 at approximately 3.8 percent, down from 4 percent in FY26, with anticipated slippages remaining below 1 percent and loan growth expected to exceed industry averages by about 2 percent, while maintaining a RoA of 1.8 percent. Despite a cautious outlook on FY27 NIMs due to competitive yield pressures and rising term deposit rates, Karur Vysya Bank is expected to outperform these estimates. The availability of Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 is also anticipated to help minimize slippages, as the bank is well-prepared for the ECL transition.
As the exit quarter for FY26 shows NIMs at 4.2 percent (compared to the 4 percent calculation), Karur Vysya Bank is positioned to surpass the previously projected FY27 RoA of 1.7 percent. Consequently, FY27 net interest income (NII) estimates are revised upward by 1.5 percent while opex estimates are lowered by 3 percent, resulting in a 6 to 7 percent increase in pre-provision operating profit (PPoP) and profit after tax (PAT) estimates. The FY27 RoA is now projected at 1.8 percent, as opposed to the earlier estimate of 1.7 percent.
In light of a stronger-than-expected trajectory for RoA, the target multiple has been adjusted to 1.8 times, up from 1.6 times, which raises the target price for March 2027 to ₹360, compared to the earlier target of ₹310. The recommendation remains a “Long” position.
Published on May 8, 2026
