LTP: Rs 63.10 MCap: 861 crore
5yr H/I: 276/29
Karnataka Bank had a dividend yield of 7.1 percentforFYo8andit has seen the ratio of its dividend payout to PAT increase steadily from 14.3 per cent in FY99 to 25.1 per cent in FY08. During the December 2008 quarter, the bank’s net profit grew by 29 per cent mainly from treasury gains and provisioning write back. Treasury income was strong in the quarter, growing 34 per cent, and MTM provisions of Rs 46.2 crore on investments made earlier this year were reversed. Deposits grew faster at 21.1 per cent, versus advances, which lagged at 15.1 per cent. Net interest income in the quarter was helped by a 105 bps increase in yields on advances and the cost of deposits went up by only 44 bps. However, the deteriorating asset quality will necessitate higher provisioning going ahead, impacting profitability. The bank is well capitalised with CAR at 13.58 per cent. Currently valued at 0.5x book, the stock seems attractive despite short term concerns.
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