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Last Updated : Sep 18, 2018 03:19 PM IST | Source:

Buy Kotak Mahindra Bank; target of Rs 1490: ICICI Direct

ICICI Direct is bullish on Kotak Mahindra Bank has recommended buy rating on the stock with a target price of Rs 1490 in its research report dated July 20, 2018.

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ICICI Direct's research report on Kotak Mahindra Bank

Kotak Mahindra Bank’s operational performance continued to remain steady. However, higher provision impacted earnings growth. NII grew 15% YoY at Rs 2583 crore, led by healthy credit offtake at 24% YoY to Rs 176927 crore. NIM declined ~5 bps QoQ at 4.3% Aided by healthy growth in NII and non-interest income, profit prior to provision (PPP) came in at Rs 2032 crore. However, provision came in higher at Rs 470 crore, led by provision towards advances at Rs 260 crore and MTM loss on investments at Rs 209.6 crore (bank did not utilise amortisation dispensation). Accordingly, PAT came in lower than our estimate at Rs 1025 crore (I-direct estimate: Rs 1170 crore) On the asset quality front, GNPA remained steady at 2.17% (Rs 3899 crore) while NNPA improved ~12 bps QoQ at 0.86% (Rs 1527 crore). SMA2 outstanding was Rs 189 crore (0.11% of net advances) Advances growth continued at 24% YoY, led by traction in CV, corporate banking and small business including personal loans at 40%, 25% and 43% YoY. Deposit accretion slowed down at 16% YoY to Rs 189744 crore with marginal dip in CASA ratio at 50.3% Additional details on subsidiaries were provided. AUM of wealth management business was at ~Rs 2. 5 lakh crore as of June 2018.


The bank has been maintaining RoA of 1.7% with RoE of 12-14% consistently. We remain positive on the fundamental strength given steady NIM at 4.2-4.3%, healthy business growth and improvement in CI ratio ahead. Asset quality is seen to remain prudent in spite of marginal SME pain expected and GNPA seen at ~2% in FY20E. With non-banking businesses (prime, life insurance and securities business) strong on growth and profitability, value enrichment remains a positive. Therefore, proportion of non-banking business in overall profitability is on the upturn at 35%. Valuing the stock on SOTP, we revise our target price upward to Rs 1490 from Rs 1450 earlier and maintain our BUY rating on the stock.

For all recommendations report, click here

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First Published on Jul 23, 2018 05:10 pm
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