Kotak Mahindra Bank's January-March profit beat analysts' estimates, but accretion in savings accounts going forward will be a key monitorable, analysts said.
The bank's net profit for the quarter stood at Rs 3,495 crore, up 26.3% year-on-year. Analysts polled by Bloomberg estimated a Rs 2,898 crore net profit for the three months.
Kotak Mahindra Bank's total deposits grew by 16.5% year-on-year in Q4 FY23 to Rs 3.63 lakh crore. Despite the overall growth in deposits, the bank's low-cost current account-savings account ratio declined to 52.8% in the quarter, down from 53.3% in the third quarter of FY23.
A year earlier, as of March 31, 2022, the bank's CASA ratio stood at 60.7%.
The bank's overall advances grew by 18% year-on-year and rose from Rs 2.71 lakh crore in Q4 FY22 to Rs 3.19 lakh crore in Q4 FY23.
"We've had a pretty good year. The financial sector and the banking sector in particular is going through an amazing period. It's a period when Indian banking has really stood out," said Uday Kotak, chief executive officer of Kotak Mahindra Bank, during the bank's earnings press conference on Saturday.
Kotak Mahindra Bank's operating expenses also rose 26% year-on-year to Rs 3,641 crore.
On a consolidated level, Kotak Mahindra Bank's net profit for Q4 FY23 stood at Rs 4,566 crore, up 17% year-on-year from Rs 3,892 crore in Q4 FY22.
Kotak Mahindra Bank's stock was trading at Rs 1,912.55 apiece, as 10:25 a.m. on Tuesday. The benchmark Nifty Bank was up by 0.38% at the time.
Out of the 41 analysts tracking the company, 26 maintain a 'buy' rating, 12 recommend a 'hold' and three suggest a 'sell' on the stock, according to Bloomberg data. The average 12-month consensus price target implies an upside of 11.4%.
Here's what analysts made of Kotak Mahindra Bank's Q4 performance:
Yes Securities
Savings account balance growth was impacted by customers moving to debt mutual funds and life insurance products.
Management has stated that the bank would grow at 1.5 to 2 times the rate of nominal GDP growth.
Spread compression in corporate lending continues.
Maintains 'add' with a target price of Rs 2,200 per share.
Motilal Oswal Financial Services Ltd.
Mix of unsecured loans rose to 10% of assets, and management has suggested raising this to the mid-teens by the end of FY24.
Net interest margins expanded further, and outlook remains buoyant.
A strong earnings performance was driven by lower operating expenses and controlled provisions.
Maintains 'neutral' with a target price of Rs 2,050 per share.
JefferiesÂ
Bank's loan growth moderated to 18% year-on-year versus 23-29% over past three quarters.
Management expects credit costs to stabilise around 50–60 basis points.
A pick-up in savings and retail term deposit growth is key to supporting healthier loan growth over the next 12 months.
Valuation is at a reasonable level, but still at a premium to peers.
Maintains 'buy' but the target price reduced to Rs 2,400 per share from Rs 2,470 per share.
Nirmal Bang Institutional Equities
Kotak Mahindra Bank's high-yielding unsecured book witnessed strong growth, supporting margins.
Saving account deposits were subdued as affluent customers moved their balances to debt mutual funds.
Management stated their focus is on increasing unsecured retail loans, and the bank continues to use credit substitutes to avoid irrational pricing of loans.
Maintains 'buy' with a target price of Rs 2,243 per share.
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