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Karnataka Bank: A quality base stock to be in our portfolio for short and long term

Karnataka Bank Limited is engaged in providing a range of banking and financial services, including retail, corporate banking and other-banking activities in addition to treasury and foreign exchange business.

Karnataka bank Limited share trading in the undervalued category and it fell more than 10% despite getting good financial result. Karnataka Bank Limited share Q4 net profit increased 14.83% from Rupees 31.36 crore for the quarter ending March 2021, as against the net profit of Rupees 27.31 crore for the corresponding quarter of 2019-20.

The bank also posted an all-time high annual net profit of Rs482.57 crore for the Financial Year 20-21 which is 11.76% as against the last year's Rupees 431.78 crore. Total annual Deposits as of march-2021 also stands at all time high of Rupees 75,654.86 crore. Stocks asset quality increasing gradually year on year.

Today stock closed at Rupees 62.25 with the green tag of 0.40%.

Despite giving good financial results, the stocks slips 10 %. Recently bank declared loan of Rs 160 crore to Reliance Home, Reliance Commercial as fraud. "Both the accounts were classified as non-performing assets and have been fully provided for. As such, there is no impact on the financials of the bank going forward," Karnataka Bank said in the statement.

Recently this bank was imposed 1 crore fine by reserve bank of India for contravention of the directions contained in RBI Circulars on `Lending to Non-Banking Financial Companies (NBFCS)' and `Bank Finance to Non-Banking Financial Companies (NBFCS)' while sanctioning credit facilities to Infrastructure Leasing and Financial Services Ltd.(IL&FS) and its group companies. Karnataka bank informed the exchange that the Bank had already made full loan provision and there is no other financial impact other than the penalty amount.

This private bank have PE ratio of 4.01 and PB ratio of 0.32 which is very low comparing to its peers. Company providing a consistent dividend of 2.89% and issued 1:10 bonus in the year 2020.

Since this stock completed its correction and consolidation process, share price is now set to move for the target price of Rupees 70.

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