Karnataka bank – private bank @ public sector valuation

(Rushil) #102

Hopefully this is the last such disclosure

(Manish Vachhani) #103

(..pd..) #104

This is was already done by MoneyControl couple of weeks back when list of banks came out. Hopefully it is priced in…

(GSrikan) #105

For ppl interested in Mr Vijay Kedia’s observations(very short interview). There is a mention Ktk bank.

Disc: invested

(MKT) #106

Hi GSrikan, i heard in one of the recent interviews (alpha mougals in Bloomberg) with Mr. Kedia that he has exited ktk bank over concerns on raising NPAs. Just fyi. Dont know if fully exited. Thank you.

(Raghu) #107

Is this 86 cr is in addition to what moneycontrol article listed earlier ? i remember MM had reported over 120 cr exposure by KTK or the total exposure itself is 86 cr? can anybody help to clear

(GSrikan) #108

In the latest interview given (the link of interview is posted in my previous post), he mentioned partial stake has been sold as he expects NPAs nay rise further and may take longer time to resolve. I believe (I don’t have much expertise in either banking or investing) the future NPA rise has been discounted in current price up to certain level. Stable NPA numbers (in absolute numbers) in the current quarter would taken in positive manner by market.

The latest disclosure regarding geetanjali is known, I believe. What might have surprised the market is it has not been identified as NPA/fraud earlier and thus “no provision” has been made for it.

The sad saga continues in Indian banking industry. But, I believe, this is an opportunity for fresh investment unless we believe there will be no growth/recession in India.

Disc: invested

(GSrikan) #109

10% increase in business turnover (deposits + credit) in one quarter?? They used to do 3000 cr average per quarter. Very surprising. Can anybody throw some light on this?

(Saravanan B) #110

(Saravanan B) #111

(Saravanan B) #112

Kedia fans, are you convinced that Kedia is assured of the positive developments about the banking industry. He is positive about Karnataka Bank.

(GSrikan) #113

Hi Saravanan, Thanks for putting up the links of interviews of Mr Mahabaleswara rao & Mr Vijay Kedia.

It seems, the efforts the management has put in since last few years of macro economic headwinds seem to be finally paying up.

The expansion of branch network, migrating the regular banking to Apps & internet banking, focusing on increasing the CASA part of the deposits, increasing focus towards advance growth have started yielding results. The current quarter (Mar 2018) might be worst quarter the Bank could see (Due to the new stringent NPA classification rules) and would slowly improve from then onwards.

This quarter’s growth is the best growth the Bank has seen in terms of both deposits and advances (advances growth was very good last quarter too which makes it even more compelling). QoQ comparision may not be ideal way to compare, but I guess, it still gives a reasonable picture in nature of change happening here.

(Saravanan B) #114

I posted the interviews to convince Kedia followers. I would advice investors to add their homework without relying on Kedia. I might sound counterintuitive but you will have to dig deeper. The bank is undergoing a deep transition. You would notice the transformation if you look deep by dissociating yourself from just 2 ratios.

(shunz) #115

one thing that I don’t understand is that KBL NPA is at 4.2 whereas axis NPA is at 5.2 (huge divergence between its reported figure and RBI figure), yet axis trades at a P/B of 2 whereas KBL is trading barely at 1. what is the reason for this? are we missing something?

source: https://dbie.rbi.org.in/BOE/OpenDocument/1608101727/OpenDocument/opendoc/openDocument.faces?logonSuccessful=true&shareId=6

(GSrikan) #116

I do not know the exact reason but I am putting out my generic opinion.

The bigger private banks have diversified sources of incomes (for ex: Investment banking [Axis capital], fund management [equity & debt mutual funds]), higher CASA deposits (50% vs 29%), higher RoA (1.75% vs 0.75%), higher Net interest margins (3.7% vs 3%), higher RoE (20% vs 8%), nation wide presence vs KBL’s south concentration etc.

According to Mr Vijay Kedia’s opinion, A bank would command close to 2 P/B, when NIM is > 3%, ROA > 1, ROE > 15%, NNPA < 1%, CASA > 30% & reasonable growth % in advances & deposits.

(abi.varghese) #117

(sambandham82) #118

But the banks that qualify based on these criteria (only HDFC bank, Indusind, kotak have higher RoE, NIM and lesser NNPA of 1) are trading at 3-4.5 times Book value… Indian bank is also one that comes close.

(GSrikan) #119

Yes. Only few banks meet this criteria and they are trading at hefty valuations. Most of the times the valuation given by market is right. If ktk bank is trading at this very low valuation of 0.7 P/B, it is for right reason. The banks you mentioned are run by very admired individuals who have proven themselves with respect to sustainable consistent and quality growth. Their capital allocation skills are also proven (successful investments into non banking divisions). They always focus on risk mitigation, which is proven from their NPA track record.

Ktk bank is 100yr old bank which has managed to survive and grow at not so good pace. NPA track record is better than only PSUs. Until unless it shows that it can grow at good pace and bring down the NPAs as well as those big quantity “would be” NPA numbers under control, the bank won’t get re-rated. As the macro economic conditions improve, with the management showing intent to grow, good days might be ahead. We need to keep close track of those NPA numbers and restructured etc accounts.

(Vilas D'Souza) #120

This quarter, the bank might even post a loss due to Nirav Modi issue. We’ll need to watch what comes out. I have a feeling that most private banks especially the large ones except hdfc and kotak are managing the books and npa. The real npa numbers are way higher.

(Divyanshu Taneja) #121

Results out but nothing found regarding Gitanjali gems issue loss whether booked or not , members are requested to focus light on Gitanjali gems issue and further noticeable points