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KVB reported a 3% PAT beat at Rs7.9bn (ROA: 2.1%), driven by higher NII and provisions coming in ~41% below estimated, partly offset by lower other income (~18% below estimated). Credit growth remained robust at 20.4% yoy, led by broad-based traction across commercial and corporate segments, while deposit growth accelerated to 16% yoy/4.5% qoq, supported by healthy CASA growth and stable CASA ratio of 27.5%. KVB has mobilized FCNR B deposit of Rs6.8bn. NIM was stable at 4.26% (excluding one-off interest income), with Management guidance of NIM above 4% going ahead. Asset quality improved, with GNPA declining to 0.7%, while adequate provisioning buffers provide flexibility to manage transition to the ECL framework. Management expects FY27 credit growth of 18–20% and ROA of ~2%. We raise our earnings estimates by 2-11% and expect ROA to remain at ~2% over FY27-29E. We reiterate BUY while revising up our TP by ~8% to Rs420 from Rs390, valuing the bank at 1.9x Sep-28E ABV

Growth accelerates; margin stable qoq

KVB posted strong credit growth of 20.4% yoy/6.6% qoq, driven by broad-based traction across commercial and corporate segments. Retail loans grew 20.8% yoy/4.5% qoq, led by mortgages along with personal and deposit loans, while housing, retail jewelry, and vehicle loans were relatively muted. Deposit growth accelerated to 16% yoy/4.5% qoq, supported by healthy CASA growth of 15.4% yoy/4.4% qoq, keeping CASA ratio stable at 27.5%. NIM was stable at 4.26% (ex one-off interest income), with Mgmt guidance of NIM above 4% going ahead. However, higher deposit rates following 1Q revisions have increased the cost of fresh deposit mobilization, with funding costs expected to remain elevated over coming 2-3M. KVB expects FY27 credit growth of 18-20%.

Healthy asset quality, but prudent provision buffers built in

KVB’s gross slippages moderated to Rs1.2bn (0.5% of loans), while better recoveries and write-offs led to a 5bps qoq improvement in GNPA to 0.7% and NNPA remained stable at 0.2%. KVB has also built adequate provisioning buffers, including Rs1bn for West Asiarelated risks, Rs1bn in contingency provisions last year and an additional Rs250mn in 2QFY27. Further, 41% of the Rs3.73bn restructuring pool is already provided for, offering sufficient levers to manage the transition to ECL framework.

We retain BUY on KVB; raise TP by 7.7%

We raise our earnings estimates, within the 2-11% range, factoring in the better operating leverage and contained credit cost; we expect the bank to deliver superior ROA of ~2% over FY27-29E. Thus, we reiterate BUY on KVB while revising up TP by ~8% to Rs420 from Rs390, valuing the bank at 1.9x Sep-28 ABV. Key risks: Slower-thanexpected growth and resurgence of NPAs in the retail an/SME sectors due to macro/micro dislocation.

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