Telephones NAYAN M. VALA SECURITIES PVT. LTD.

022-26105973/74/32549230/32448788 403-404, Cosmos Court,

Fax.26124310/E-Mail: vala@bom3.vsnl.net.in Above Waman Hari Pethe Jewellers,
Website: www.nayanmvala.com S. V. Road, Vile-Parle (west),
Mumbai – 400056.

Key Indicators as on 21/05/2010 Karnataka Bank

Closing Price (Rs.) 155.80 BUY
EPS (Rs.) 31/3/2010 12.47 Brief Profile:
P/E 12.49 Established in 1924 at Mangalore in Karnataka
BV per Share (Rs.) 141.45 state. It is a leading ‘A’ CLASS SCHEDULE
PB 1.10 COMMERCIAL BANK in India. It now has
Mkt Cap (Rs Cr) 2087.55 a national presence with a network of 464
Equity Capital(Rs Cr) 133.97 branches spread across 20 states and 2 Union
FV 10 Territories. The Bank was promoted by Late
Share holding (%) Mar 2010 Shri B. R Vyasarayachar and other leading
Promoters 0.00 members of South Kanara Region. The bank has
Public 46.82 shown organic as well as inorganic growth by
FIIs 26.49 merging with Sringeri Sharada Bank Ltd.in the
Others 26.69 year 1960, Chitradurga Bank Ltd. in the year 1961 and
Bank of Karnataka in the year 1966. Shri P. Jayarama Bhat heads the bank as Managing Director
since 13.07.2009 till date.

INVESMENT HIGHLIGHTS
Consistency in growth
• The bank has shown a CAGR of 10.36% in its revenues for the past 9 years.

• From the table given below it can be concluded that the bank is consistent in its
growth. There is a decline in PAT and NII for FY10 which was mainly due to
global financial turmoil in 2008 & 2009. So if we bar the performance of FY10 as
an exceptional case the PAT and Income of the bank has clocked a CAGR of
14.38% and 11.03% respectively for the past 8 years except for 2010 when the
bank posted a 37.34 % decline in PAT (Y-O-Y) which was Rs.167.12 Cr.
(Source: CMIE)
CAGR CAGR
(Rs. Crore) Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 2009 Mar-10 10

PAT 91.13 110.12 133.17 147.15 176.03 177.03 241.74 266.71 14.38% 167.12 6.87%

Total Icome 984.47 1050.79 1118.91 1061.38 1194.6 1441.47 1803.81 2270.55 11.03% 2416.56 10.36%
Interest
Income 743.24 811.47 848.45 839.93 1018.03 1256.24 1560.46 1917.4 12.58% 2043.42 11.77%
Interest
Expenditure 602.76 656.61 634.77 523.05 652.07 836.39 1101.71 1443.83 11.56% 1707.79 12.12%

NII 140.48 154.86 213.68 316.88 365.96 419.85 458.75 473.57 16.40% 335.63 10.05%

• The Price to adjusted book (adjusted with Net NPA) value is 1.2 times one of the
lowest amongst the industry.
Dhanalakshmi Bank Ltd. 2.51
Development Credit Bank Ltd. 2.02
Karur Vysya Bank 1.66
South Indian Bank Ltd. 1.16

MEMBER: NATIONAL STOCK EXCHANGE OF INDIA LTD CODE NO.23/13511/13

 Telephones
022-26105973/74/32549230/32448788
Fax.26124310/E-Mail: vala@bom3.vsnl.net.in
Website: www.nayanmvala.com
NAYAN M. VALA SECURITIES PVT. LTD.
403-404, Cosmos Court,
Above Waman Hari Pethe Jewellers,
S. V. Road, Vile-Parle (west),
Mumbai – 400056.

• The details of dividend for the past 5 years are given below. At CMP the dividend
yield stands out to be 4.25%.
(Source: CMIE)
Dividend date Dividend Rate %
25-May-06 30
21-May-07 35
19-May-08 50
25-May-09 60
17-May-10 40

Other Indicators
• The capital adequacy ratio of the bank is 12.37% which gives them enough room
for growth.

• The bank is well positioned to increase its profit from other operations like
distribution of insurance of Met Life Insurance and Universal Sompo General
Insurance Co as well as through DP service of CDSL.

• Major financial institution/banks have shown interest in the recent past and can be
a possible target for takeover.
(Source: CMIE)
Percent
Holder Name Shares
Axis Bank Ltd 1.19
Bajaj Allianz Life Insurance Company 1.97
Credit Suisee Singapore Ltd 2.62
Dsp Blackrock India Tiger Fund 1
Equinox Partners Lp 1.12
Farn Health Care Pvt Ltd 1.31
Franklin Templeton Investment Funds 1.72
Hsbc Financial Services (Middle East) Ltd 4.48
Kurto Fund Lp 2.52
Life Insurance Corporation Of India 2.69
Macquarie Bank Ltd 2.29
Reliance Capital Trustee Company Ltd 1.92
Religare Capital Markets Ltd 1.04
Religare Securities Ltd 1.62
Swiss Finance Corporation Mauritius Ltd 2.82
Wellington Management Company Llp A/C B 1.36
Total 31.67

MEMBER: NATIONAL STOCK EXCHANGE OF INDIA LTD CODE NO.23/13511/13

 Telephones
022-26105973/74/32549230/32448788
Fax.26124310/E-Mail: vala@bom3.vsnl.net.in
Website: www.nayanmvala.com
NAYAN M. VALA SECURITIES PVT. LTD.
403-404, Cosmos Court,
Above Waman Hari Pethe Jewellers,
S. V. Road, Vile-Parle (west),
Mumbai – 400056.

• Looking at the results of year ended 2010 one may look that OPBP&C (Operating
Profit Before Provisions and Contingencies) fell by 45.68 %
from Rs. 480.21 Cr to Rs. 260.84 Cr., primarily because of high cost of
deposit as shown in table below.

(Rs. Crore) 2010 2009 Percent

Change
Interest Earned 2043.42 1948.76 4.86

Interest Expended 1707.79 1444 18.26

This seems to be changing in the latter part of the FY2009-2010 as evident

from quarterly result below. EPS went down from average of Rs. 4.15 from
the past 10 quarters to Rs 3.31 in Qtr1, Rs.1.34 Qtr2, Rs 3 in Qtr3. March quarter
results have again been in line with the past performance as EPS for Q4 of FY10
was Rs.5.53.

(Source: CMIE)
(Rs. Crore) Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10
3 mths 3 mths 3 mths 3 mths 3 mths 3 mths
Total Income 653.33 641.8 609.67 562.88 620.89 623.12
Operating
Income 512.31 512.77 477.28 494.37 527.62 544.15
Other Income 141.02 129.03 132.39 68.51 93.27 78.97
Extra-ordinary
Income 46.16 0 0 14.97 31.08 15.83
Expenditure 564.07 558.66 569.61 546.53 584.28 549.02
Personnel cost 63.82 39.16 50.97 53.08 55.33 47.42
Other expenses 35.29 46.66 36.28 49.26 40.32 53.39
Interest 369.75 416.48 430.74 438.95 424.46 413.64
PBP 89.26 92.19 57.56 21.59 100.78 74.1
Prov. & cont. 0 9.05 17.5 5.24 64.17 0
PBT 184.47 130.45 74.18 16.35 36.61 108.67
Tax 95.21 47.31 34.12 0 0 34.57
PAT 89.26 83.14 40.06 16.35 36.61 74.1
EPS (Rs.) 7.34 6.84 3.3 1.34 3 5.53

From NAYAN M. VALA SECURITIES PVT.LTD.RESEARCH

By Dharmesh N. Vala and Harsh B. Chauhan

MEMBER: NATIONAL STOCK EXCHANGE OF INDIA LTD CODE NO.23/13511/13

 Telephones
022-26105973/74/32549230/32448788
Fax.26124310/E-Mail: vala@bom3.vsnl.net.in
Website: www.nayanmvala.com
NAYAN M. VALA SECURITIES PVT. LTD.
403-404, Cosmos Court,
Above Waman Hari Pethe Jewellers,
S. V. Road, Vile-Parle (west),
Mumbai – 400056.

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MEMBER: NATIONAL STOCK EXCHANGE OF INDIA LTD CODE NO.23/13511/13