Kotak Mahindra Bank Ltd. share price target

Maintain BUY with SOTP of Rs 1,378 (4.5x Mar-20 core ABV of Rs 238 + Rs 309 for subs). A one-time MTM hit (~Rs 2.1bn) and higher NPA provisioning (LLP +49% QoQ, PCR rose to 61%) capped KMBs net earnings (down 9% QoQ, missing estimates by ~7%). The business remains healthy as ever, with broad based loan growth (+24% YoY), best in class NIMs (4.30%) and negligible net stress incl. SMA-II (97bps, down 6bps).

ff Its NIMs witnessed moderation due to slower transmission under MCLR regime. However, the Management believes the NIMs have bottomed out and may start improving, going forward. As CASA book constitutes ~50% of the Bank's deposits, and the Management...

20 July 2018 1QFY19 PAT grew ~12% YoY to INR10.2b 9% miss due to higher provisions (investment provisions of INR2.1b). However, operating profit grew 27.4% YoY to INR20.3b (6% beat), led by 15% YoY NII growth. Margins shrank 5bp QoQ to 4.3%, as incremental loan growth was led by corporate, while borrowings increased 70% YoY/33% QoQ. CASA deposits grew 33% YoY, led by 51% YoY growth in SA deposits (SA cost of 5.61%). CASA ratio declined 50bp QoQ to 50.3%. GNPLs increased by 1.9% QoQ, but management sounded cautious on the SME/business banking segment and cited risks from inflated collateral value that is being used by banks as a basis for extending loans. KMB made additional provisions (apart from investment provisions of INR2.

ICICI Securities Ltd | Retail Equity Research Kotak Mahindra Bank's operational performance continued to remain steady. However, higher provision impacted earnings growth. NII grew 15% YoY at | 2583 crore, led by healthy credit offtake at 24% YoY to | 176927 crore. NIM declined ~5 bps QoQ at 4.3% Aided by healthy growth in NII and non-interest income, profit prior to provision (PPP) came in at | 2032 crore. However, provision came in higher at | 470 crore, led by provision towards advances at | 260...

Lagged Expectation: The bank's standalone performance lagged expectations with slower than estimated momentum on loan growth, NIMs saw further pressure despite the bank conserving on capital, quarter end CASA growth hitting high base and core fee income growth lagging advance growth.

Kotak Mahindra Bank (KMB), on a standalone basis, reported robust 15% growth in Net Profit to Rs 1124.05 crore in the quarter ended March 2018 (Q4FY2018) over the corresponding quarter of last year. The bank has exhibited healthy 19% growth in the net interest income, while core fee income surged 33% in Q4FY2018. Net interest margins (NIMs) has improved on sequential basis to 4.35% in Q4FY2018 compared with 4.20% in the previous quarter. The bank has also showed healthy improvement in asset quality in Q4FY2018. The cost-to-income rate has further improved to 45.92% in Q4FY2018 from 46.99% in the previous quarter and 46.21% in the corresponding quarter last year. Employee cost impacted...

ff KMB witnessed a robust performance in profitability in its financial services and life insurance business subsidiaries. Notably, the Bank owns 100% stake in these subsidiaries. For the first time, the Bank disclosed the Embedded Value of its life insurance business to Rs58.2bn; which is relatively higher than the street expectations. ff Credit costs including standard assets provisioning stood at 61bps in FY18 compared to 56bps in FY17. Additionally, the Management guided the credit cost to trend down further in FY19. With major contribution from Business Banking, SME and Retail segment, the Bank expects loan growth of over 20% in FY19....

Kotak Mahindra Bank (KMB) reported steady set of numbers. NII grew 19% YoY to |2579 crore, led by healthy credit offtake at 24.7% YoY to | 169718 crore. Margins improved QoQ to 4.35% from 4.2%. Healthy operational performance continued with PPP at | 2018 crore, up 18.6% YoY. Cost income ratio improved ~110 bps QoQ at 45.9%, despite one-time provision of ~82 crore related to change in gratuity ceiling. Credit cost remained lower, however, provision related to investment depreciation at ~| 132 crore (bank did not utilized...

Strong but valuations add to discomfort:The key highlight for the quarter is a sequential increase in margins consequent tophenomenal accretion in CASA and MCLR increase. All the other parameters remained encouraging: Loan and core fee income growth was strong, Asset quality was stable and Cost ratios continued to trend down.

Maintain BUY with SOTP of Rs 1,371 (4.5x Mar-20 core ABV of Rs 238 + Rs 302 for subs). Even as KMB reported an expectedly impressive 4QFY18, CASA accretion stood out (Rs 240bn over FY18, 2x FY17). Loan growth (+25% YoY) was at an 8-qtr high, with robust fee growth (+33% YoY) and uptick in NIM (4.35%, +15bps QoQ). Asset quality improved further (G/NNPAs down 9/11bps QoQ). Zero restructured loans and negligible SMA-II (4bps) capped a perfect show. Despite the investments in 811 (Rs 1.5bn), opex growth was restricted to 17%.