Buy Kotak Mahindra Bank; target of Rs 2350: Prabhudas Lilladher

Prabhudas Lilladher's research report on Kotak Mahindra Bank

KMB saw a weak quarter as miss on provisions, fees and NII led to 13.7% lower core PAT. While NII was cushioned as cash was utilized to pay-off borrowings, Q2FY26 would see impact of normal liquidity and 50bps repo cut suggesting NIM decline QoQ. However, H2FY26 NIM could improve due to CRR cut and deposit repricing. While loan growth was healthy at 4.2% QoQ, it was led by SME and mid-market. Barring housing, retail growth was sluggish due to weak demand while unsecured recovery is slower. Hence, we trim loan growth by 100bps for FY26/27E to 16% YoY. Asset quality worsened QoQ due to higher net slippages/provisions led by MFI stress and slower corporate recovery.

Outlook

We cut NIM & fees, increase provisions but reduce opex; net cut in core PAT for FY26/27E is avg. 4.2% We tweak multiple to 2.3x from 2.4x on Mar’27 core ABV and slightly reduce TP to Rs2,350 from Rs2,400. Retain ‘BUY’.