Kotak Mahindra Bank Q3 Results Review - Margins Surprise On The Upside, Upgrade To 'Buy': Systematix

NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Systematix Research Report.Kotak Mahindra Bank Ltd. reported Q3 FY24 earnings of Rs 30 billion, (+6% QoQ, -2% YoY). The reported earnings were broadly in-line with estimates with flattish net interest margins (versus expectation of decline) compensating for the 7% QOQ increase in opex. Key highlights of the quarter were:Net advances increased by 3.2% QoQ, 16% YoY with broad based contribution with 24-29% of incremental qoq credit from unsecured loans, mortgages and commerical vehicle/construction equipment. Deposits growth of 2% QoQ, 19% YoY was led by term deposit growth of 3% QoQ while current account and savings account growth was flat QoQ. CASA ratio declined to 47.7% (-52 bps QoQ). Borrowings increased by 15% QoQ with higher lower cost re-financing from SIDBI.However, NIMs remained stable QoQ as 17 bps qoq increase in cost of funds was largely offset by 16 bps yields on the back of improved interest earning assets mix which had higher share of high yielding credit substitutes in the investment book.Other income declined 1% QoQ due to mark-to-market loss, in OIS book, of Rs 1.68 billion versus gains for key peers.Cost to income ratio increased to 48.4% (+194 bps QOQ) due to higher retirement costs and higher festive led promotional spends.While key asset quality metrics gross/net non-performing asset at 1.7%/0.3% were stable QoQ, the bank highlighted emerging stress in credit cards, MFI and tractor finance. Kotak Mahindra Bank also provided Rs 1.9 billion (21 bps of Net advances) for its alternative investment fund exposure (post tax impact of Rs 1.43 billion),The bank delivered return on asset of 2.2% and return on equity of 13.2%..We rollover our forecasts to March-26 and upgrade our rating to 'Buy' from 'Hold' with March-25 target price of Rs 2,095 (from Rs 1,940) valuing the standalone bank at 2.5 times Mar-25 adjusted book value per share (same multiple as ICICI Bank Ltd.) for FY25-26E average retuan on asset of 2.2% versus 2.1% for ICICI Bank Ltd. We assign Rs 515 per share for its holding in the subsidiaries. We also factor the proceeds from the sale of 51% stake in Kotak General Insurance to Zurich Insurance, for Rs 40.5 billion, expected to be completed by June-24. Our rating upgrade considers our expectation of continuity of policies under the new Managing Director-Mr Ashok Vaswani, with the bank being amongst our preferred picks within the large cap private banks..Click on the attachment to read the full report:.Kotak Mahindra Bank Q3 Review- AIF Provisions, Treasury Loss Contribute To Slight Earnings Miss: Motilal Oswal.DISCLAIMERThis report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Kotak Mahindra Bank Q3 Results Review - Margins Surprise On The Upside, Upgrade To 'Buy': Systematix

Advances growth led by higher yielding retail loans

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