Kotak Mahindra Bank Q3 Results Review  — Dolat Capital Retains 'Buy'; Sees 31% Upside; Here's Why

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Dolat Capital Report

Kotak Mahindra Bank Ltd. reported a strong quarter with healthy business growth (loan /deposit growth at 3%/4% QoQ), sequential decline in slippage ratio to 1.7%, stable net interest margin QoQ at 4.93%, and in line profitability metrics with return on asset at 2.1%.

Sequential decline in cost of fund by 9 bps and contained opex aided earnings, offset by muted fee income (RBI embargo impact) and rise in credit costs led by higher provision coverage ratio.

Despite sequential rise in MFI slippage, decline in overall slippage was led by lower delinquencies from secured portfolios. Management highlighted that slippage in personal loan book is tapering, that in credit card book has plateaued, while micro finance delinquencies are yet to peak. We factor in credit cost of 65 bps over FY25-26E (similar as nine months).

Tweaking earnings with slightly lower opex, we retain ‘Buy’ rating with unrevised target price of Rs 2300, valuing the standalone bank at 2.4x Sep-26E adjusted book value (3.4x including subs). Levers on NIM/fee from lifting of RBI embargo and opex rationalisation should ensure more than 2.1% RoA.

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