KMB reported in line NII growth of 8% YoY, impacted by high slippages and few one-offs (previous quarter’s interest reversal, compound interest waiver of Rs1.1bn). Operating profits benefitted from higher treasury gains and better fee lines, growing by 25% YoY. Sequential loan growth of 4.5% YoY was driven by HL (10% QoQ) and SME (6-7%), CV/CE (9%), and agri loans (9%). Pro-forma slippages at 4% for 4QFY21 and 2.5% for FY21 seemed higher than peers (HDFCB/Axis/ICICI at 1.7%/3%/2.5% for FY21). KMB’s higher CoF in previous cycle and associated asset side risks could be playing out in our view. Pro forma PCR increased to 64% (from 61%), but remains below peers, which are at 70-75%
OutlookTweaking our forward estimates, we maintain our ACCUMULATE rating with an unrevised TP of Rs1,900 based on 3.7x FY23E ABV for the standalone bank and value of subsidiaries, implying a P/ABV of 4.9x.
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