Kotak Mahindra Bank Q3: Brokerages upgrade stock on strong performance, reversal of RBI ban awaited; stock jumps 9%

Kotak Mahindra Bank reported a 10 percent YoY rise in its net profit at Rs 4,701 crore in Q3FY25.

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Private sector lender Kotak Mahindra Bank Ltd. shares bagged a slew of upgrades from broking houses as analysts turned bullish the bank following its positive earnings show for the October-December quarter (Q3) of the fiscal year 2024-25 (FY25). Shares of the lender jumped over 9 percent in trade on January 20.

Kotak Mahindra Bank reported a 10 percent rise in its net profit at Rs 4,701.02 crore for Q3FY25, compared to Rs 4,264.78 crore in the year-ago period, the lender said in an exchange filing. However, the net profit declined close to 7 percent sequentially from Rs 5,044.05 crore in the September quarter.

The interest earned by the bank in the reported quarter rose 14.75 percent to Rs 16,633.14 compared to Rs 14,494.96 crore in the same period of the previous financial year, the filing showed.

On asset quality front, the bank's management noted that slippages in personal loans moderated, credit cards plateaued, while microfinance trended upward.

At 9.20 am, shares of Kotak Mahindra Bank surged to trade at Rs 1,903.6 per share, up 8.3 percent on the NSE.

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Domestic brokerage Nuvama Institutional Equities said, "Kotak Mahindra Bank's earnings offer both growth and quality, and shall turn out to be among the best in the sector in our view. A marginal uptick in NIM, healthy loan growth, strong deposit growth and a QoQ decline in slippage with a higher PCR are the key positives."

Kotak Bank's loan and deposit growth were healthy in Q3, growing 15 percent and 16 percent on-year, respectively, in a tough macro environment, which is encouraging, noted Japanese brokerage Nomura Holdings. Kotak Bank's NIM was largely stable quarter-on-quarter at 4.9 percent, driven by a decline in funding cost.

DAM Capital said that the bank's Q3 saw better operating internals, while business growth continued to be robust. This quarter saw lower slippages and very strong opex efficiency, despite the RBI embargo in place.

"Kotak Mahindra Bank delivered a healthy operating performance amid challenging macro
conditions, thusshowcasing its resilience and strategic foresight. The anticipated reversal of the ban on card issuance and the revival of customer onboarding via its advanced online and mobile banking channels are set to act as powerful near-term catalysts," said Motilal Oswal.

Should you buy, sell, or hold Kotak Mahindra Bank stock?

Nuvama Institutional Equities gave Kotak Bank shares a double upgrade, bumping its rating on the lender to 'buy' from an earlier 'sell' call, with a fresh target price of Rs 2,040 per share.

"We believe [the bank] offers growth, quality and a safe place to hide in a milieu of weak deposits and high NPLs. The bank has done a particularly commendable job turning in a strong Q3 even as it weathered the RBI ban," said Nuvama.

DAM Capital also upgraded Kotak Bank shares to 'buy' from 'neutral', issuing a target price of Rs 2,020 for every share. In the same vein, Jefferies also raised its target price to Rs 2,200 for every share, up from Rs 2,120.

Nomura Holdings reaffirmed its 'buy' rating, however it cut its price target on shares to Rs 2,110 per share, down from Rs 2,170. On the other hand, Emkay Global reiterated its 'reduce' call, but hiked its target price to Rs 1,750 apiece from Rs 1,700 earlier.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.