Karnataka Bank Q2 FY27: PAT up 36% YoY to ₹436 Cr, margins expand, asset quality improves

Karnataka Bank's consolidated net profit for Q2 FY27 (quarter ended September 30, 2026) rose 36.5% YoY to ₹435.86 Cr from ₹319.22 Cr, and 4.0% sequentially from ₹419.12 Cr, on interest income of ₹2,503.87 Cr (+14.9% YoY, +5.1% QoQ). Standalone PAT was near-identical at ₹435.89 Cr. No exceptional or extraordinary items were recorded in either the current quarter or the comparable periods, so the 36.5% YoY growth is a clean, unadjusted figure rather than one flattered by a prior-year low base. Net profit margin widened to 15.60% of total income from 12.65% a year ago and 15.31% last quarter, while the operating-profit-to-interest-income ratio expanded YoY to 24.05% from 20.20%, though it eased slightly from 24.36% in Q1 FY27. The improvement was underpinned by asset quality: gross NPAs fell to 2.27% of advances from 3.33% a year earlier (2.58% last quarter) and net NPAs to 0.74% from 1.35% (0.87% last quarter), with provisions (other than tax) down to ₹14.74 Cr from ₹20.07 Cr YoY and the provision coverage ratio rising to 85.78% from 81.05%. Advances grew 25.5% YoY to ₹90,581 Cr and deposits 12.0% to ₹1,15,117 Cr, lifting the credit-deposit ratio to 78.7% from 75.2% at FY26-end. Against management's own FY27 targets from the August 2026 concall — advances growth of 15-20%, deposits of 10-15%, cost-to-income of 52-53% and ROA of 1.35-1.40% — the Bank is running ahead on advances, on track on deposits, and inside the cost-to-income band at ~52.7% (on NII plus other income), but still short on ROA at 1.26% annualised, barely moved from 1.29% last quarter. Capital adequacy eased to 20.36% from 21.10% in Q1 but stays well above regulatory minimums. No management press release accompanied this filing, and no formal street/consensus estimates for the quarter could be located, so the print cannot be benchmarked against analyst expectations. The quarter also saw the launch of the 'Trade Konnect' digital trade-finance platform and the 'Nava Dhamaka 2026' retail campaign, alongside 13.8% YoY growth in the corporate banking segment and 16.0% in retail banking; separately, COO Raja B S resigned on October 19, 2026, days before results, though the filing gives no indication this is tied to the quarter's numbers. The quarter's YoY profit and margin improvement, if sustained, would help close the remaining gap to the Bank's ROA target; the next checkpoints are whether cost-to-income holds inside the 52-53% band as the Bank proceeds with its planned 31-32 branch openings for FY27, and whether the credit-deposit ratio keeps climbing toward management's stated priority without straining funding.