KVB’s 1QFY18 results were in line with expectations. While PAT remained flat YoY
and loan growth remained 7.7%, overall growth should pick in 2HFY18. While
slippages were high during the quarter, they were largely from the watch list. Next
two quarters could be challenging but FY19 looks much stronger for the bank.

While credit cost will still remain elevated in FY18, we
expect FY19 to be a more meaningful year for the bank with RoE improving to
14.7% from 12.6% in FY17. Despite the recent run up, the stock is trading at 1.4x
it FY19 Adj BV, and we believe this leaves further scope for re-rating. We
maintain BUY on the stock with a target price of Rs 160.

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