ICICI Securities: Karur Vysya Bank Update - Improving Visibility On RoA Recovery; Upgrade
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ICICI Securities Report
ICICI Securities sees a retracement of valuation to 1x (~15% lower than 5-year average multiple) on likely ~60 basis points RoA improvement over FY21E-FY22E to 0.9%.
Key rationale: a) overall collections at ~95% as on October 29, 2020, with better collection in commercial segment than peers, speaks for Karur Vysya Bank’s superior customer profile (chart 14); b) calibrated growth during FY17-FY20 (5% loan CAGR) to ensure lower legacy stress and strong PCR at 64% would keep credit cost low; c) strong liability franchise (charts 5/6/7), adequate capital (tier-1 @ 16.4%) and completion of corporate book realignment will help revive credit growth quicker than peers; and d) revamped digital platform and business processes are likely to enable quality growth ahead.
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