Neutral Kotak Mahindra Bank; target of Rs 1950: Motilal Oswal

Motilal Oswal's research report on Kotak Mahindra Bank

Kotak Mahindra Bank (KMB) posted a standalone PAT of ~INR33.4b (5% miss, 5% YoY growth). Consol. PAT stood at INR50.4b (13% YoY growth) in 2QFY25. NII grew 11.5% YoY to INR70.2b (inline). NIM moderated 11bp QoQ to 4.91%. Other income grew 16% YoY to INR26.8b (11% miss). Total revenue thus grew 12.7% YoY. Advances rose 14.7% YoY/2.5% QoQ to ~INR4t while deposits grew 15.1% YoY/3.1% QoQ. CASA mix improved 20bp QoQ to 43.6%. Fresh slippages were elevated at INR18.7b (INR13.6b in 1QFY25). GNPA/NNPA ratio rose 10bp/8bp QoQ to 1.49%/0.43%. PCR declined 344bp QoQ to 71.4%. KMB entered into an agreement to acquire the personal loan book of Standard Chartered Bank (INR41b) to further fortify its position in the retail credit market. The acquisition is likely to be completed in the next three months, subject to regulatory/other approvals.

Outlook

We fine-tune our earnings and estimate KMB’s RoA/RoE at 2.2%/13.6% by FY26. Reiterate Neutral with a TP of INR1,950 (based on 2.2x FY26E ABV).