Karnataka Bank Q2 FY27 Results Analysis: PAT Jumps 37%, Asset Quality Improves on All Metrics (KTKBANK)

Karnataka Bank Ltd's Q2 FY27 numbers came in strong, with revenue of Rs. 2,793.96 Cr (+10.76% YoY) and PAT growth of +36.59% YoY. Here's a quick read of what worked, what to watch, and what management said.

Quarter Snapshot

Karnataka Bank delivered 36.59% PAT growth with NII up 34.93% YoY, cost-to-income inside the guided 52-53% band, and asset quality improving on every metric (GNPA 2.27%, NNPA 0.74%, PCR 85.78%). The key tension is the upgraded FY27 ROA target of 1.35-1.40% versus a 1.26% Q2 print, with funding (CASA at 31.81% vs 33%+ target, borrowings up 317.54% YoY) the swing factor for H2.

Key Investment Insights

Key Positives

• NII grew 34.93% YoY to Rs.982.44 Cr; PPOP grew 36.86% YoY to Rs.602.22 Cr
• PAT grew 36.59% YoY to Rs.435.89 Cr; EPS Rs.11.52 vs Rs.8.44 a year ago
• Cost-to-income at 52.68%, down 626 bps YoY, inside the 52-53% guided band
• GNPA fell to 2.27% (-106 bps YoY) and NNPA to 0.74%; PCR rose to 85.78% from 81.05%
• Advances grew 25.54% YoY, above the 15-20% guidance; deposits grew 11.96%
• Provisions at Rs.14.74 Cr, an annualized credit-cost proxy of ~0.03% on average advances
• All four operating segments improved results YoY; Retail Banking result +35.09% YoY with margin up 370 bps to 26.21%
• CRAR at 20.36% (Basel III), comfortably above regulatory minimum

Risk Factors

• Q2 annualised ROA of 1.26% is below the upgraded FY27 guidance of 1.35-1.40%; implied H2 requirement is ~1.43-1.53%
• Provisional CASA ratio of 31.81% is below the 33%+ FY27 target
• Borrowings rose 317.54% YoY to Rs.5,463.77 Cr as asset growth outpaces deposit growth
• Other income fell 15.52% YoY and 18.38% QoQ; Treasury Operations revenue fell 3.44% YoY
• NIM dipped 3 bps QoQ to 3.17% from Q1's 3.20%, with the October 7 repo hike yet to impact EBLR-linked yields
• Corporate Banking segment assets grew 34.92% YoY vs Retail +16.35%, showing growth mix leaning on corporate