Delivering consistent and superior returns amidst industry headwinds
Amidst the slowing down of banking sector earnings and a broader market sell off, bank investors would likely focus their attention on select quality bank stocks that can deliver superior growth and are protected from contemporary asset quality shocks. We view KVB is favourably placed to withstand the current industry headwinds. KVB has amongst the best-in-class asset quality metrics and 98% secured loans. With high coverage and low & reducing incremental asset quality stress, KVB’s credit costs are likely to reduce versus the industry’s worsening profile. Further, the bank’s loans growth momentum remains strong and is likely to accelerate (despite the sector slow down), bolstered by its RAM segment and a low CD ratio. Improvement in cost metrics will further strengthen the returns. Overall, KVB can consistently deliver 1.6-1.7% ROA in medium term. We view investors would find KVB attractive to own with better-than-industry earnings growth, superior asset quality metrics and attractive valuation. BUY.
KVB Bank Ltd – Initiating Coverage – SMIFS Institutional Research
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