Kotak Mahindra Bank share price gained more than 2 percent intraday on July 28, a day after the private lender reported an 8.5 percent year-on-year (YoY) decline in standalone net profit for June quarter, dented by higher provisions, primarily with regard to COVID-19, and lower other income.
Profit declined to Rs 1,244.45 crore, which was on expected lines given the higher COVID-19 related provisions, compared to Rs 1,360.2 crore reported in the year-ago quarter.
Net interest income increased by 17.8 percent YoY to Rs 3,723.85 crore and net interest margin came in at 4.4 percent against 4.48 percent in Q1 FY20.
During the June quarter, the bank raised Rs 7,442 crore through a QIP issuance of 6.5 crore equity shares.
Here is what brokerage have to say on the stock:
Nomura | Rating: Neutral | Target: Rs 1,375
The company’s core pre-provision operating profit (PPoP) growth of 17 percent YoY was aided by savings account rate cuts in April. Using margin levers extremely well to deliver a strong PPoP.
Its strong capital position and prudent underwriting helped deliver superior return ratios. However, PPoP growth sustainability will be contingent on delivery on loan growth.
Nomura expects RoE of 11-12 percent for FY21-23, CNBC-TV18 reported.
CLSA | Rating: Outperform | Target: Rs 1,400
The Q1 results were better than expected with in-line NII and beat on PpoP. The low, single-digit moratorium in the corporate book highlights its superior underwriting.
While loan growth lags peers, it’s been able to deliver core PPoP growth of 17% YoY. It can gain market share in low-yield segments like mortgages/AAA/AA corporate. However, valuation remains expensive at the current levels, CNBC-TV18 reported.
ICICI Direct | Rating: Buy | Target: Rs 1,600
The company's long-term focus continues on maintaining risk-adjusted returns but given economic headwinds, ICICI Direct expects growth to no longer stay in the limelight amid coronavirus outbreak.
In terms of promoter overhang, the board recently approved a renewal for Uday Kotak and Dipak Gupta for three years from January 2021 but RBI approval for the same is awaited.
Cautious extension of moratorium based on customer profile provides comfort for delinquency shocks post-moratorium period. The company has been a consistent performer over the years, driven by reasonable RoE, high RoA ratios and strong margin profile. Hence, premium valuations for management strength and sustainability.
Motilal Oswal | Rating: Neutral | Target: Rs 1,300
The company continues to report steady progress in building a strong liability franchise with CASA ratio improving further to 57%. However, loan growth has reported sharp deceleration as bank remains cautious in a weak macro environment, which got further aggravated due to the COVID-19.
Motilal Oswal estimate bank to maintain a cautious stance in lending though reduction in SA/TD rates should aid margins to a certain extent. On the asset quality front, though NPLs have increased during the quarter, moratorium book declined to 9.65%. The bank has further indicated that 80% of the moratorium book is secured, and therefore, will have lower LGDs. However, with overdue accounts at >6% of loans besides the moratorium book, broking house expect NPL formation to increase in the near term.
At 1226 hours, Kotak Mahindra Bank was quoting at Rs 1,350.35, up Rs 27.90, or 2.11 percent, on the BSE.
