Karnataka Bank Q1: consolidated PAT +43% YoY to ₹419 Cr on lower provisions, wider NIM

Karnataka Bank opened FY27 with consolidated net profit of ₹419.1 Cr, up 43.3% from ₹292.5 Cr a year earlier and up 2.7% sequentially from ₹408.3 Cr — a clean print with no exceptional items on either side, so reported and underlying growth are the same. The engine was margin, not volume: interest earned rose a modest 5.4% YoY to ₹2,382.7 Cr while interest expended actually fell (₹1,444.3 Cr vs ₹1,505.7 Cr), lifting net interest income roughly 24% to ~₹938 Cr and NIM to 3.20%. Net profit margin expanded ~414 bps YoY to 15.31%, and ROA jumped to 1.31% from 0.97% — comfortably clearing management's FY27 'ROA 1%-plus' target set on the Q4 call.

The second lever was credit cost. Provisions (other than tax) collapsed to ₹28.7 Cr from ₹110.8 Cr a year ago, tracking a sharp asset-quality clean-up: gross NPA fell to 2.58% from 3.46%, net NPA to 0.87% from 1.44%, and provision coverage rose to 84.70% from 81.11%. That drove pre-tax profit up ~55% YoY to ₹551.8 Cr; the gap between PBT (+55%) and PAT (+43%) is entirely a normalised tax rate — the effective rate rose to ~24% from ~18%, not an operating miss. Sequentially the profit was held back by a spike in employee cost to ₹411.4 Cr (from ₹282.2 Cr in Q4 and ₹343.6 Cr a year ago), which pushed the cost-to-income ratio to roughly 55% — above the 52-53% band management guided to, the one metric running behind plan this quarter.

The stock went into the print at ₹279, up 2% over the past month of trading.

For context: this is the highest quarterly PAT in the last 6 quarters on our records; PAT has now risen for 2 consecutive quarters; revenue is at a 6-quarter high.

On growth, the loan book skews to corporate: corporate-banking segment assets are up ~23% YoY versus ~12% in retail, consistent with the 15-20% advance-growth guidance, though interest income on advances rose only ~4.9% as yields reset. Capital is ample at 21.10% CRAR (up from 20.46%). The quarter also saw a cluster of board changes — new Executive Director Biji S S taking charge, and Dr M Aruna Shyam joining as independent/additional director — alongside a ₹127 Cr transfer from the Investment Fluctuation Reserve to Revenue Reserve under the new RBI investment-classification norms. No formal published street consensus was available for this mid-cap, so the print is judged against the company's own guidance, which it broadly met on profitability and asset quality while lagging modestly on cost efficiency.