Anand Rathi has recommended buying Karnataka Bank and has set a target price of Rs 298. The bank's core operating profits declined by 19% quarter-on-quarter due to a decrease in net interest income and non-interest income. However, profitability has been maintained through modest provisions, and there has been a significant improvement in asset quality.
Going forward, Karnataka Bank is expected to experience credit growth in the mid-teens, with favorable earnings supported by modest credit costs. The projected return on assets (RoA) is close to 1%. The target price reflects a valuation of 0.8 times the projected adjusted book value for FY27.