Kotak Mahindra Bank Ltd. share price target

Moderate growth in advances backed by home loans Advances grew 5% QoQ to 1.85 trillion. Within advances, growth came from home loans (+6% QoQ), Credit cards & small business (+11% QoQ), agricultural loans (+6% QoQ). Overall, retail book grew 7% QoQ while corporate book...

ICICI Securities Ltd | Retail Equity Research Kotak Mahindra Bank's operational performance continued to remain steady. Higher provision impacted earnings growth. NII grew 16.3% YoY at | 2689 crore, led by healthy credit offtake at 21.2% YoY to | 184940 crore. Margins declined by ~10 bps QoQ at 4.2% Aided by healthy growth in NII and other income, profit prior to provision (PPP) came in at | 2095 crore. Provision came in higher at | 354 crore, led by provision towards investment at | 132 crore....

ff The Bank expects its loan book to grow in 20% range over next few quarters and at the same time, it will continue to avoid concentration risk. Demand for personal vehicle loan book remained subdued during the quarter. ff The Bank allowed short term corporate loan book to rundown due to sharp volatility in...

Slump in margins' structural & to persist: We read the performance as mixed with the negatives being led by pressure on marginswhich we assess is structural and is led by competitive compression on core spreads. The pressure came notwithstanding the bank going slow on corporate growth - consequently aiding margins through lower leverage and positive shift in loan mix.

Kotak reported a stable quarter with a PAT growth of 15% (S) and 21% (C) backed by advances growth of 21% (S) and 18% (C) and aided by lower provisions. The cost did inch up in part due to front-ended digital costs. NIMs contracted marginally by 10 bps sequentially largely due to lag effect in costs pass through. Vehicles, mortgages and unsecured personal loans have grown at a robust 40%, 23% and 39% respectively outpacing the corporate book growth of 19%. Caution on business banking remain growing at a mere 3% YoY. On a consolidated basis, the insurance business...

KMBs PAT increased 15% YoY to INR11.4b (in-line) in 2QFY19. NII grew 16% YoY to INR26.9b, led by healthy loan growth of 21% YoY. Margins, however, contracted by 10bp to 4.2%. Based on our full-year estimates, we believe KMB should deliver PAT of INR25.4b in 2HFY19 (INR21.7b in 1HFY19). (+4.5% QoQ), led by strong growth in retail loans 24 October 2018 (+28% YoY), while deposits increased by 24% YoY. SA deposit growth was healthy at 36% YoY (43% YoY on daily average basis), with incremental cost of SA at 5.65%. Core deposit mix (CASA + TD less than INR50m) was at 79%.

Kotak Bank reported a steady operational quarter in 2QFY19 with PPoP for the standalone bank up 21.5% YoY. However, provisions remained slightly elevated in 2QFY19 as the bank continued to shore up its PCR (up 200bps sequentially to 63%), as well as due to elevated MTM provisions on the investments book. As a result, standalone PAT growth was moderate (+15% YoY), although growth in consol. PAT was healthy at 21%. We believe that the reduction in margin for KMB (down 10bps QoQ to 4.2%), could well be transient, as the loan book (predominantly linked to 6-m MCLR) gets re-priced. Management indicated that the outlook for risk-adjusted margins for KMB seems to be positive, driven by a reduction in...

Kotak Mahindra Bank had issued 100 crore non-convertible perpetual noncumulative preference shares (PNCPS) of face value | 5 each aggregating to | 500 crore. It will be added to the paid up capital but not equity capital. Post the issue, the promoter stake, which was earlier at 30.03%, has declined to ~19.7%, adhering to RBI requirement on reducing shareholding under 20%. The RBI has been informed about the transaction while approval on the same is awaited. RBI had previously mandated the bank reduce promoter stake to 20% of paid up capital by December 2018 and 15% by March 2020. As per media reports, issued PNCPS will be listed on the stock exchange....

CASA ratio of KMB improved by 640bps to 50.3% against 43.9% YoY. GNPA/NNPA ratios improved to 1.93%/0.77% against 2.24%/1.07 % on YoY. Earnings are expected to sustain a healthy growth of 24% CAGR on the back of robust loan growth at 21% CAGR. With a stable earnings outlook, we value KMB at 3.9 x P/BV and increase...

Kotak Mahindra Bank (KMB), on a standalone basis, reported robust 15% growth in Net Profit to Rs Kotak Mahindra Bank (KMB), on a standalone basis, reported robust 12% growth in Net Profit to Rs 1024.94 crore in the quarter ended June 2018 (Q1FY2019) over the corresponding quarter of last year. The bank has exhibited healthy improvement in asset quality, while net interest margins (NIMs) remained strong in Q1FY2019. NIMs of the bank was nearly steady at 4.30% in Q1FY2019 compared with 4.35% in the previous quarter, while declined from 4.50%...