Karur Vysya Bank

Karur Vysya bank is probably at the end of its NPA recognition cycle. Asset quality healing should begin post 1HFY19.
It is increasing granularity via smaller SME ticket sizes and more retail loans
Gross advances grew ~11/3% YoY/QoQ primarily driven by robust retail growth of ~20/3% YoY/QoQ
SME loans grew ~11/4% YoY/QoQ to form 35.9% of advances
With various retail and commercial products in the digital pipeline, growth opportunities are immense
CASA deposits grew ~11/4% YoY/QoQ to form 29.2% of total deposits.
The management is looking to achieve a CASA ratio of 31-32% by FY19
KVB has created a dedicated team for MF and insurance distribution from Apr-18
All in all the prospects for the bank look good. Only patience is needed to see the bank function properly and give good
returns.

According to broker consensus the average target price lingers around Rs. 150 as opposed to the present share price
around Rs. 102

Karnataka Bank
The Power sector stress has largely been recognized by Karnataka Bank.
The housing loan delivery model has been overhauled in collaboration with marquee consulting firm BCG. This new
system has been implemented on a pilot basis in Bangalore and Hyderabad. Housing loan business in these specific
branches has jumped 3x compared with the same period last year. Turnaround Time (TAT) has fallen from ~30 days to
less than 7 days. Following the successful pilot, this model is being replicated pan India.
The bank added 1 million new customers in FY18 and will add another 1.2 million in FY19
Cost to income ratio will decline to 45%.
The bank guides for FY20 RoA and RoE of 1% and 13%, respectively

According to broker consensus the average target price lingers around Rs. 180-200 as opposed to the present share
price around Rs. 108 which will be a huge jump returning good figures for the owners.

South Indian Bank

The management reiterated that it would continue to grow its asset book in the retail, SME and agri segments at a
higher pace. It would avoid large corporate or consortium based lending
There are zero accounts in its watch list of large corporate book exposure to NCLT accounting for ~| 370
crore with ~43% provided
The bank aims to achieve NIMs of 3%, CASA of ~30% and RoA of ~1% by FY20E the bank has indicated
that bulk of stress has now been recognised and been provided for
Both slippages and credit cost are estimated at ~| 600 crore each, going ahead. This would augur
well for overall profitability of the bank, which is estimated to cross >| 700 crore by FY20E

According to broker consensus the average target price lingers around Rs. 34-40 as opposed to the present share price
around Rs. 21.

Canara Bank
The Management clarified that the Bank (a) has not availed RBI’s dispensation of spreading MTM loss over next 4
quarters; (b) continues to provide 50% on secured exposure towards accounts referred to NCLT vs. 40% permitted by
the RBI; (c) has fully provided for incremental gratuity liabilities; and (d) has fully provided for exposure to fraud in gems
and jewellery and classified it as NPA.
The Management expects substantial improvement in asset quality in FY19 on the back of sharp decline in SMA-2 loan
outstanding to 0.8% in Mar’18 from 4% of loan’s in Dec’17. The Bank looks forward to 11-12% growth in loan book in
FY19 led by Retail, SME and Agriculture segments.
Following improvement in CASA ratio to 34.3% in Mar’18 from 27.4% in Mar’17, the Bank targets a CASA ratio of 36%
by Mar’19 led by strong growth in CASA deposits and lower renewal of bulk deposits.

According to broker consensus the average target price lingers around Rs. 25-260 as opposed to the present share
price around Rs. 245. This stock was particularly taken to create short positions on it due to limited upside.