·KVB reported another strong quarter, with RoA at 2.1%, driven by (a) 26bps qoq NIM expansion, (b) healthy TWO recoveries and (c) controlled opex (-5% yoy). The bank also created Rs 1.6bn contingent provisions towards identified sectors.
·Management guided FY27 NIMs at ~3.8% (FY26: 4.0%), slippages below 1%, loan growth at ~2% above industry and RoA at 1.8%.
·With FY26 exit-quarter NIMs at 4.2% (4.0% calc.), KVB appears well placed to exceed our earlier FY27 RoA estimate of 1.7%. We therefore raise FY27 NII estimates by 1.5% and reduce opex estimates by 3%, resulting in a 6%/7% increase in PPoP/PAT estimates. We now build FY27 RoA at 1.8% vs 1.7% earlier.
·Given the stronger-than-expected RoA trajectory, we raise our target multiple to 1.8x (vs 1.6x earlier), increasing the Mar’27 TP to Rs 360 (vs Rs 310 earlier). Retain LONG.
NIMs rise 26bps qoq; retail mix sharpens: KVB reported 26bps qoq NIM expansion to ~4.25% (ex one-off IT refund interest) in 4QFY26, driven by (a) 6bps qoq reduction in CoD as term deposits repriced, (b) 18bps qoq rise in yields on advances to 9.9% aided by improving RAM mix (gold loan yields at ~10.8%; share at 30%), (c) increase in the fixed-rate book to 29% from 23% qoq, and (d) healthy LAP/jewel loan growth at 9%/5% qoq. TWO recoveries stayed strong at Rs 2.16bn. The bank continued shedding lower-yielding non-retail assets and reducing the co-lending book. Management guided FY27 NIMs at ~3.8% amid rising competitive pressure on yields.
Business growth strong, asset quality stable: KVB delivered solid operating performance, with advances/deposits growth at 17%/13% yoy. Amid war-related macro uncertainty, the bank turned cautious on incremental lending and also witnessed lower utilisation of working-capital limits during 4QFY26 – a positive from an asset-quality perspective. Slippages remained contained at ~80bps, while the bank created ~Rs 1.6bn contingent provisions towards potentially vulnerable sectors such as textiles, fertilisers, chemicals, granite and quartz in case geopolitical disruptions persist. SMA-30+ improved to 17bps from 24bps qoq, with GNPA/NNPA stable at 75bps/19bps. The bank plans to add 50 branches in FY27.
FY27 earnings estimates raised by 7%: KVB continues to deliver positive surprises across core operating metrics, aided by healthy business growth, sustained NIM expansion and controlled credit costs. With 4QFY26 NIMs at ~4.25%, the bank enters FY27 with strong earnings tailwinds. While management guided cautiously on FY27 NIMs amid competitive pressure on yields and upward repricing of term deposits, we believe KVB can outperform guidance. Availability of ECLGS 5.0 should also help keep slippages contained, while the bank remains comfortably placed on ECL transition. Accordingly, we raise FY27E RoA estimates to 1.8% (vs 1.7% earlier). We also increase our target multiple to 1.8x (vs 1.6x earlier), revising the Mar’27 TP to Rs 360 (vs Rs 310 earlier).
