Karur Vysya Bank: Stock is on the verge of a 6 year breakout on monthly charts. Bank has been reporting good results consistently with the last 2 Qs clocking 16% ROEs. All numbers are looking quite good - cost to income ratio, PCR, credit costs and CRAR. Has reported 16% ROEs in last 2 Qs. NIMs have compressed by 20bps QoQ but that hasn’t impacted ROE. Management expects NIMs to contract by 20bps further in the coming Qs. Bank is trading at 1.18x BV now, if they can maintain 16% ROEs for the next few Qs I won’t be surprised if it trades at 1.5x BV. Bank has traded at 1.3-2x BV consistently between 2012-2017.
Karnataka Bank: Very similar in profile to Karur Vysya Bank, regional private bank with sub 10k Cr MCap. They have recently appointed a new CEO - Srikrishna Harihara Sarma. Sarma was part of the founding management team in HDFC and has worked at Yes Bank and Jio Payments since. The new CEO is guiding for aggressive growth in advances and plans to take the Credit Deposit ratio higher soon. Very similar numbers trajectory to KVB, all metrics look healthy. Last 2Qs have seen 17% ROEs inspite of NIM compression in Q1. Stock is at ATH but only trades at 0.87x PBV. If the ROE trajectory continues, I don’t see why it can’t trade at 1.5x BV. Bank has traded at such valuations previously.
Disc: Invested in both near CMP with stop losses. I am new to this approach of blending technicals with fundamentals, so my analysis may be completely off. Please do your own due diligence. I may exit my positions at any time.