Neutral Kotak Mahindra Bank; target of Rs 1300: Motilal Oswal

Motilal Oswal 's research report on Kotak Mahindra Bank

KMB reported a mixed quarter with weak earnings performance, affected by lower fee income, 32bp QoQ decline in margins and sharp sequential decline in loan growth. On the asset quality front, slippages were elevated, driving 45bp QoQ increase in GNPA ratio while provision coverage remained broadly stable. Moratorium 2.0 declined to 9.65% with 95% coming from moratorium 1.0. However, moratorium figures are not comparable due to a different computation methodology used across banks. - On the business front, loan book declined 7% QoQ, affected by the (a) lockdown, and (b) bank’s cautious approach in a weak macro environment. SA deposits’ growth was steady, driving further improvement in CASA mix to 56.7%.

Outlook

We have cut our PAT estimate for FY21/22E by 10%/11%, primarily to factor in higher credit cost, lower growth and other income. Maintain Neutral.

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