Asset quality has improved sequentially, with the bank reporting gross non-performing assets (NPAs), as a percentage of total advances, of 2.34% in the March quarter, down 91 bps from a year ago.
Kotak Mahindra Bank
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Kotak Mahindra Bank share price rose 2 percent in early trade on May 5, a day after the company reported its March quarter earnings.
Private sector lender Kotak Mahindra Bank on Wednesday reported a 64.5 percent surge in net profit in the March quarter to Rs 2,767.4 crore on higher net interest income and writeback of provisions, exceeding estimates by a wide margin.
Net interest income in the quarter jumped 17.6 percent to Rs 4,521 crore. Non-interest income rose 21.4% year on year to Rs 1826 crore. Net interest margin (NIM), a key measure of profitability, stood at 4.78%, up 39 basis points (bps) from last year.
The bank has written back Rs 453 crore in Covid provisions, resulting in a provision and contingency write-back of Rs 306 crore in the fourth quarter. In comparison, it had made provisions of Rs 734 crore in the year ago.
Asset quality has improved sequentially, with the bank reporting gross non-performing assets (NPAs), as a percentage of total advances, of 2.34% in the March quarter, down 91 bps a year ago. Net NPA also improved to 0.64% from 1.21% last year same quarter.
In absolute terms, GNPA was down by Rs 956 crore to Rs 6,470 crore, and net NPA was down by Rs 969 crore to Rs 1737 crore in Q4FY22.
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Here is what brokerages have to say about the stock and the company after March quarter earnings:
Morgan Stanley
Research firm Morgan Stanley has kept an equal-weight rating on Kotak Mahindra Bank reflecting valuation and relative risk reward. It kept a target of Rs 1,965 per share.
The profit was 19% above estimate on lower credit costs, while core PPoP was in line with estimates. Loan growth acceleration remains on track.
Morgan Stanley sees core PPoP at 22% CAGR over FY22-F24 versus 4% in FY21-22, reported CNBC-TV18.
CLSA
Broking house CLSA has maintained a buy rating on the stock with a target at Rs 2,200 per share.
There was strong growth and NIM performance. The asset quality continues to improve, leading to provision reversals.
Liability mobilisation will need to rise significantly to fund loan growth.
The bank can deliver 20% CAGR and guided NIM decline of 10-15 bps will be a positive catalyst, reported CNBC-TV18.
Jefferies
Brokerage firm Jefferies has maintained buy rating on Kotak Mahindra Bank with a target at Rs 2,600 per share.
The profit was above estimates aided by writeback of credit costs & higher other income. The NII growth was healthy & in-line with our estimates with robust asset quality.
CASA growth needs to improve from 12% now. The growth & clarity on succession are the key, reported CNBC-TV18.
Prabhudas Lilladher
KMB’s Q4 earnings of Rs26.9bn (PLe: Rs17.3bn) were higher led by healthy loan growth of 21% YoY, solid fee income accretion, and provision write back.
Margins were a tad better (+16bps QoQ) led by higher CASA share. Driven by better collections overall asset quality improved QoQ. COVID provisions are ~20bps and restructuring at 44bps is lower to peers.
The bank is focused on building up sticky liabilities led by asset growth driven by healthy customer acquisition although tech investments would continue which may keep opex a bit elevated.
We like Kotak Bank owing to solid credit practices and balance sheet management, although valuations are steep to upgrade the stock. We retain ‘ACCUMULATE’ with SOTP based target price of Rs 1,925.
Motilal Oswal
Kotak Mahindra Bank delivered a healthy core operating performance and broad-based loan growth. NIM inched up further sequentially and is at the higher end of the range in recent years.
The bank continues to demonstrate steady progress in building a strong liability franchise, with CASA ratio standing ~61% (highest in the industry).
We maintain our neutral rating with a target price of Rs 2,000/share (3.1x FY24E ABV + Rs 587 for its subsidiaries).
Sharekhan
The bank has higher capital buffers with strong low-cost liability franchise along with lower core credit cost scenario.
We believe the bank is well positioned to benefit from the credit demand cycle with its calibrated growth stance, strong underwriting, assessment capabilities, and healthy digitalisation benefits adding to the moat of its business strength.
Further, we expect its subsidiaries to contribute to consolidated earnings, as they gain scale and market share going forward.
We maintain our buy rating on the stock with an SOTP-based price target of Rs 2,250.
At 09:28 hrs Kotak Mahindra Bank was quoting at Rs 1,809.00, up Rs 32.35, or 1.82 percent on the BSE.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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