Prabhudas Lilladher’s research report on Kotak Mahindra Bank
KMB’s earnings of Rs16.8bn (PLe: Rs16.9bn) was in-line with expectations though certain line items were weak. NII growth of 8% YoY/flat QoQ and higher provisions of Rs11.8bn dragged quality of earnings. Asset quality though was stable and other stress indicators of restructuring+SMA2 was only 23bps of loan. Bank carries a 57bps of COVID provision though would have comforted us if it was higher and similarly with PCR which was at 63%, lower amongst peers. Bank has continued with its stance of lending judiciously without letting guard down and underwriting remains paramount. Hence it has chosen to grow only certain focused secured segments so we think conservatism should continue. Bank has seen relative underperformance recently but despite the same bank remains one of the most valued.
We retain HOLD with largely unchanged estimates and adjust TP to Rs1,900 (from 1,912) and subs value of Rs389 based on FY23E.
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