Ventura has recommended hold rating on Kotak Mahindra Bank in its January 24, 2013 research report
“Kotak Mahindra Bank’s financing businesses earnings grew by 22.7% QoQ contributing 79% to consolidated PAT. Standalone Banks NII grew by 26.3% YoY and 8.5% on QoQ to Rs 823 crore led by the robust loan growth and steady NIMs. Deposits grew by 34.2% YoY to Rs 51,524 crore whereas advances grew by 26.3% YoY to Rs 50,245 crore. While CASA deposits comprised 26% of all deposits as compared to 32.2% in FY12. Savings deposit rose to 49.5% YoY and stood at Rs 6,616 crore aided by the banks new policy of giving interest of 6% p.a. on deposits of more than Rs 1 lakh since 1st November’11. Broadly, asset quality has been stable as gross NPAs and Net NPAs declined during the quarter to1.5% & 0.6% respectively with the provision coverage ratio for the bank stands at 56.4% excluding write offs. Restructured assets pool continues to hold the negligible mark of 0.02% of advances. The management continues to see some pressure on CV/CE portfolio with regard to asset quality.”
“Cost to income ratio declined by 298 bps QoQ to 49% on the back stronger revenue growth, improving productivity and focus on cost. Other operating expenses increased moderately by 11% yoy & 3% qoq to Rs 292 crore. However the management has guided for a sub 50% cost to income ratio in the next one year, which will support earning growth and RoE improvement. The bank added 18 branches during the quarter. Going ahead, the bank expects to take the number of branches to 500 by FY13 from the current 407 branches. Consolidated income for Q3FY13 was higher by 26.5% YoY and stood at Rs 2,811.5 crore as against Rs 2,222.8 crore in Q3FY12. Earnings were higher by 25.6% YoY to Rs 585.8 crore on the back of notable performance by subsidiaries.”
“Robust finance business, healthy asset quality and incremental improvement in capital market business are key triggers to drive the growth further. Strong loan growth outlook, resilient net interest margins, aggressive branch expansion strategy, focus on building quality liability franchise, best-in-class risk adjusted returns, well capitalized and integrated financial market based business model are key value drivers to provide fillip to earnings. At a CMP of Rs 652 the stock is trading at 3.2x and 2.8x its FY13 and FY14 P/B and we recommend a HOLD on the stock,” says Ventura research report.
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