Kotak Mahindra Bank Q4 Results Review - Strong Quarter; One-Off Gains Boost Earnings Further: Motilal Oswal

Motilal Oswal Report

Kotak Mahindra Bank Ltd. posted a standalone profit after tax of Rs 41.3 billion (21% beat), which grew 18.2% YoY in Q4 FY24 aided by steady revenue growth and one-off gains from the reversal of alternative investment fund provisions (Rs 1.57 billion), interest on IT refund (Rs 1.4 billion), and tax credit (Rs 2 billion). Consolidated profit after tax grew 16.9% YoY to ~Rs 53.4 billion.

Net interest income grew 13% YoY to Rs 69.1 billion (in line; up 5.4% QoQ) as net interest margin improved 6 basis points QoQ to 5.28%. Other income grew 36.2% YoY (17% beat) for the quarter.

Advances grew 17.6% YoY/4.6% QoQ to Rs 3.8 trillion, while deposits rose 23.6% YoY/10% QoQ. Current account and savings account mix moderated 220 bp QoQ to 45.5% in Q4 FY24.

Fresh slippages increased 11% QoQ to Rs 13.1 billion. Gross non-performing asset improved 34 bp QoQ to 1.4%, while net non-performing asset remained stable at 0.34%. Provision coverage ratio declined 464 bp QoQ to 75.9% as the bank carried out higher write-offs in the unsecured segment.

We fine tune our earnings estimate; we estimate Kotak Mahindra Bank's return on asset/return on equity at 2.3%/14.1% by FY26.

Reiterate Neutral with a target price of Rs 1,700 (based on 1.8 times FY26E adjusted book value plus Rs 565 for subsidiaries).

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