Karnataka bank – private bank @ public sector valuation

(Saravanan B) #62

We have to understand, his reduction in stake has nothing to do with the underlying fundamentals. Most marquee investors also play momentum to make quick bucks. Kedia is no different. Some of them will rebalance their portfolios by cutting their huge holdings and enter into new themes.

One thing that is clouding everybody in Karnataka bank is that it is not moving up. It requires tremendous amount of patience when we hold such stocks.

In my view, the whole banking is under pressure because of NPAs and regulatory revisions. Only time will tell how these turn up.

However, feel free to make your choice if you don’t find this bank attractive.

(Saravanan B) #63

This stock is a long terms story. In my view, it will not play out in the next 6-12 months. Those who have long term horizon will benefit the most.

(shunz) #64

I am not worried because Karnataka stock price is not moving up. I am worried because I do not see considerable improvement in their fundamentals. In fact there is deterioration on some fronts.

If you look at 9 months result, you would notice that their CAR has come down to 12.2 from 13.2. if this continues then further equity dilution will follow. if they dilute equity faster than they grow the revenue then I, as an investor, am in loss.

Provisions have also gone up in the past 9 months (compared to same period in previous year). Does this mean more slippages are to follow? I had seen their stressed assets last year and noticed it was 6% of total assets. It came down from 7% in 2016 , but 6% is still high. if they dont manage this then expect more NPAs.

Another concern is that revenue from retail banking has come down. Retail is one of the strengths of this bank (for its size). CASA has also come down o 28% from 29% the previous year.

I mentioned Kedia because he reduced his holdings drastically, almost by half. This is huge. For a marquee investor who is hugely bullish on this bank it is surprising to see this kind of holding reduction.

I am in Karnataka for the long haul. I bought it with a time frame of >5 years. And I bought it an year ago. I am not in a hurry but I would be worried if bank does not show improvement in key parameters in the next 3-4 quarters.

(Saravanan B) #65

I understand your concern. I would recommend you to see the numbers of Gross NPA and Net NPA for FY18. It is coming down by .20 every quarter. As I mentioned earlier, the whole banking sector is reeling under pressure. I have looked into 38 banks. We would have to look at this bank for another year. Let us give the management some time. Now, BCG’s Saurabh Tripathi is running the transformation initiative for Karnataka Bank. We have to actually see what is changing in this year.

(Saravanan B) #66

A few of the stressed accounts come from steel companies. These accounts will be cleared off in one year time. I find the first few outcomes of NCLT is very important for all the banks.

(Saravanan B) #67

By March 2018, Karnataka Bank’s gross NPA will tend come below 3.85% and Net NPA to come around 2.65% - 2.70%. Let us wait for the March quarter on what they have to show us.

(sambandham82) #68

But other OPSB with similar fundamentals are trading at 2-3 times adjusted book value. So is it not this bank deserve at least 1.7 times ABV instead of 1.1 and hence trading at 50% discount?

(Saravanan B) #69

Yes, you are right. This examples brings Grahamian learning to the forefront. A value pick remain idle for long time that you and I expect. We will have to watch how this bank is showing up in the subsequent quarters.

In my view, it is the investors’ conviction that matters. We do not have answers for all the questions about the bank. It is important for an investor to choose what is best for him after considering all the risks associated with his prospective investment.

(Saravanan B) #70

With reference to their recent disclosure, the bank has opened close to 793 branches. I believe they have a strong potential to reach their target of 800 branches by March 2018.

(Rushil) #71

Hey. Could you throw some light on what attracted you to Karnataka bank amongst these 38 banks?
Other than price what, if any, factors do you feel signal that this is a good bet.
Thanks in advance.

(Saravanan B) #72

I would recommend you to read their annual report to understand their recent developments. I could give you some explanations but that would be against the forum’s guidelines.

Rather, I would ask you a different question, what can go wrong with Karnataka Bank with respect to other 38 banks?

Your views are most welcome!

(Vikas Pandey) #73

this list has ktk bank also

(Aditya Mehta) #74

KTK Bank’s exposure as per list - 123.27cr
Growth story will be delayed further.

(Rushil) #75

The turnaround has to happen first. Growth story is not really visible.


(Vilas D'Souza) #76

What I understand is that 22 crores is without satisfaction. Rest is satisfied. Does it mean that only 22 crores is potential loss? Given the date of lending, maybe NPA already recognised?

(Aditya Mehta) #77

Yeah, it seems so but will have to wait for more clarity.
what i think is that this a/c would have already been considered as NPA.

(Saravanan B) #78

The bank has achieved its target of 800 branches much before time. Wipro’s star Mythily joins Karnataka Bank as an Additional Director. It will be interesting to watch how they bank grows in the subsequent years. Fascinating!

(soumenghosh83) #79

Vijay Kedia has sold his stake partially in Karnataka Bank.

(sachit) #80

Yes he did, but he still retains substantial stake. Also, I have it on good authority that he sold some stake as it was a leveraged position. Not aware of the nitigritties though


If really keen to know why Vijay Kedia sold part of his holdings, Hear it from his tweets please.

And this was his previous tweet he was referring !!!


Disclosure: No holding or tracking position. Exited long back.