This pvt sector bank from Jhunjhunwala's portfolio has surged 43% in 1 mth

Karur Vysya Bank gained 4 per cent to Rs 63.35 in intra-day trade on Friday to hit its highest level since December 2019

Shares of Karur Vysya Bank extended their rally and hit an over two-year high of Rs 63.35 as the stock gained 4 per cent on the BSE in Friday's intra-day trade. The spike comes after reported the lender strong earnings with improved asset quality for the quarter ended June 2022 (Q1FY23).

In the past one month, the stock of the private sector bank has surged 43 per cent, as compared to 10 per cent rise in the S&P BSE Sensex. It was trading at its highest level since December 2019. The stock had hit a record high of Rs 137 on September 18, 2017.

Ace investor Rakesh Jhunjhunwala held 4.50 per cent stake in Karur Vysya Bank at the end of June 2022 quarter, the shareholding pattern data shows. Other marquee investors such as Ashish Dhawan (1.3 per cent), and Mukul Mahavir Agrawal (1.25 per cent) held more than 1 per cent stake in the bank, data shows.

Tamil Nadu-based Karur Vysya Bank posted a 110 per cent rise in net profit during the first quarter of the financial year (Q1FY23) at Rs 229 crore, from Rs 109 crore during the same quarter of the previous fiscal (Q1FY22).

The strong earnings were led by tighter control on operating expenses and lower credit costs (1.2 per cent annualised). Asset quality improved with GNPA at 5.2 per cent from 7.97 per cent in Q1FY22, led by negative net slippages, while the restructured pool dropped further to around 2.5 per cent of loans. Its net NPA was 1.91 per cent in Q1FY23 as against 3.69 per cent in Q1FY22.

Operating profit for the quarter stood at Rs 475 crore, up 15 per cent from Rs 412 crore during Q1FY22. Net interest income was up 17 per cent to Rs 746 crore from Rs 638 crore a year ago.

"Karur Vysya Bank is incrementally focused on driving granular growth (LAP, commercial banking, and other retail) and has confidently guided for a 15 per cent loan growth during FY23. With a steady NIM trajectory and improving line of sight on lower credit costs, we see KVB gradually regaining confidence on loan growth and steadily sustaining its core ROAs at over 1 per cent," HDFC Securities said.

The brokerage firm has raised FY23/FY24 earnings estimates by 4 per cent/6 per cent, respectively, to factor in stronger loan growth, partly offset by lower treasury income.

Those at Emkay Global Financial Services, meanwhile, said the bank is well on track after the clean-up in FY18-20, with the GNPA ratio trending down to 5.2 per cent in Q1 from the highs seen in Q1FY20 of 9.2 per cent. The return on asset (RoA) has also shown an improving trend and has now remained over 1 per cent for the second consecutive quarter.

"We like Karur Vysya Bank in the small-cap space given its steady improvement in RoE profile and management stability, best in-class capital profile (Tier I over 17 per cent) and attractive valuations (0.5x FY24E ABV). The high dividend yield of 4-5 per cent adds to the comfort," the brokerage firm said.