Archive · 25 Aug 2026
Two Regional Private Banks Show Growth Despite Valuation Risks
This article looks at two Indian private banks that appear cheaper than many similar banks.
Both banks have a price-to-book ratio of 0.9 times and have earned double-digit returns on shareholder money.
Karnataka Bank had strong growth in income and profit during Q1FY27.
Its bad-loan measures also improved, but loans grew faster than deposits.
Jammu & Kashmir Bank grew its loans and total business quickly, including outside its home region.
However, its profit declined because of higher provisions and weaker recoveries.
Both banks are trying to expand while keeping their loans healthy.
Investors may value them more highly if profits and asset quality remain strong.
The article says this is educational information, not an investment recommendation.
Karnataka Bank and Jammu & Kashmir Bank trade at 0.9 times book value, below the 1.3-times peer median.
Karnataka Bank reported Q1FY27 net interest income growth of 24% and net profit growth of 43%.
Jammu & Kashmir Bank’s advances grew 25% year-on-year in Q1FY27, but net profit fell 12.5%.
Both banks improved asset quality, while Karnataka Bank’s loan growth exceeded deposit growth and J&K Bank faced margin pressure.
The article says any rerating will depend on stronger low-cost deposits, disciplined lending, stable asset quality and limited dilution.
- Who
- Karnataka Bank and Jammu & Kashmir Bank, two Indian private sector banks.
- What
- The article assesses whether their below-peer valuations and double-digit RoE make them stocks to watch.
- When
- The performance figures primarily concern Q1FY27, including the June 2026 quarter; the J&K Bank stake reference concerns the June 2025 quarter.
- Where
- India, including Karnataka Bank’s and Jammu & Kashmir Bank’s regional and wider operations.
- Why
- Both banks trade below the stated peer median, but their future prospects depend on growth, margins, deposits, asset quality and capital needs.
Growth and valuation case
Execution and valuation-risk case
Below-peer valuation
Growth and valuation case
Both banks trade at 0.9 times book value, below the stated peer median of 1.3 times, while reporting double-digit RoE.
Execution and valuation-risk case
Their current P/BV ratios are above their respective five-year averages, so they are cheaper mainly relative to peers rather than their own histories.
Expansion prospects
Growth and valuation case
Karnataka Bank is targeting 15-20% advance growth in FY27, while Jammu & Kashmir Bank expects 18-20% credit growth and is expanding outside its home market.
Execution and valuation-risk case
Rapid expansion requires stronger deposits, stable asset quality and sufficient capital; Karnataka Bank’s loans already grew faster than deposits, while J&K Bank is considering a capital raise.
Earnings outlook
Growth and valuation case
Karnataka Bank delivered 24% NII growth, 43% profit growth and a higher net interest margin in Q1FY27; both banks also reported improved asset-quality measures.
Execution and valuation-risk case
J&K Bank’s NII rose only 2%, its margin narrowed, and net profit fell 12.5% because of higher provisions and lower recoveries from written-off accounts.
- Stocks covered
- Karnataka Bank and Jammu & Kashmir Bank
- Current P/BV
- 0.9 times for each bank
- Peer median P/BV
- 1.3 times
- Karnataka Bank RoE
- 10.4%
- Jammu & Kashmir Bank RoE
- 15.4%
- Karnataka Bank Q1FY27 profit growth
- 43%
- Jammu & Kashmir Bank Q1FY27 profit growth
- Down 12.5%
- Share-price performance
- Karnataka Bank rose 90.7% and Jammu & Kashmir Bank rose 45.1% over the past year, according to the article.