Karur Vysya Bank shares surge on record profit, margin gains
Karur Vysya Bank shares jumped more than 10% after the Indian lender posted a record quarterly profit driven by significant margin expansion, reinforcing its strong earnings trajectory.
Shares of Karur Vysya Bank surged 10.5% to an intraday high of ₹333 on Tuesday, bucking broader market weakness a day after the lender reported a 45% jump in first-quarter net profit. The private sector bank posted a net profit of ₹756 crore for the April-June period, marking its highest quarterly earnings to date. The sharp stock rally followed a nearly 3% decline on Monday, when the results were released during trading hours.
The profitability surge was primarily driven by a notable expansion in the bank's net interest margin (NIM), a critical metric for lenders. NIM grew by 48 basis points year-on-year to reach 4.34%, while pre-provision operating profit climbed 36.15%. This margin improvement came alongside aggressive balance sheet expansion, with the bank's total advances crossing the ₹1 lakh crore milestone to reach ₹1,04,680 crore.
"The bank’s total business reached ₹2,27,267 crore, reflecting our sustained growth momentum in the first quarter, with an overall business increase of 6% QoQ and a year-on-year growth of 16%," said Ramesh Babu B, Managing Director and CEO. Deposits grew 14.94% annually to ₹1,22,587 crore, supported by a 15.25% year-on-year increase in low-cost current account and savings account (CASA) deposits. The CASA ratio stood at 27.55%.
To protect its enhanced profitability, the bank announced an increase in its marginal cost of funds-based lending rates (MCLR) effective July 22. The one-year MCLR was raised by 10 basis points to 9.35%, while the overnight rate moved up to 8.85%.
Analysts view the strong quarter as a catalyst for further re-rating, with brokerage firm PL Capital maintaining its 'buy' rating and a target price of ₹345. "NIM performance has been strong for the last four quarters due to calibration in asset mix; NIM for Q2FY27 is guided to be more than 4% with upside risk," the brokerage stated. PL Capital expects loan growth of 17% for the current financial year, driven primarily by retail, agriculture, and MSME segments.
The brokerage raised its core profit estimates by an average of 2.7% and increased its NIM forecasts by 5 basis points for both the current and next financial years. The stock's recent momentum extends a longer-term bull run, with shares gaining 20% year-to-date. Despite this rally, the stock remains below its 52-week high of ₹343.55 hit in February.
