Shares of Kotak Mahindra Bank dropped over 3% in Monday’s early trading session as the bank’s Net Interest Margin (NIM) was reported at 5.02% for Q1FY25. The share price of Kotak Mahindra Bank dips 3.72% to intraday low of Rs 1756.15 on NSE.
Q1FY25 Performance
Kotak Mahindra Bank reported a standalone net profit of Rs 6,250 crore for the quarter ended June 30, 2024, marking an 81% increase over the Rs 3,452 crore reported in the same period last year. This profit after tax (PAT) surpassed the Street’s estimates of Rs 3,682 crore.
The bank’s net interest income (NII) for the quarter stood at Rs 6,842 crore, a 10% year-on-year increase from Rs 6,234 crore. The consolidated PAT jumped to Rs 7,448.16 crore, compared to Rs 4,150.19 crore in Q1FY24, representing a 79% rise. The net interest margin (NIM) was reported at 5.02% for Q1FY25.
Bank advances grew by 20% year-on-year to Rs 4.05 lakh crore, up from Rs 3.37 lakh crore as of June 30, 2023. The bank’s unsecured retail advances, including retail microcredit, accounted for 11.6% of net advances in Q1FY25.
Total deposits grew by 21% to Rs 4.35 lakh crore in the June quarter, compared to Rs 3.61 lakh crore last year. However, the current and savings account deposits (CASA) grew only 3% year-on-year to Rs 1.94 lakh crore and registered a 5% drop sequentially.
The bank’s operating profit for the first quarter increased by 6%, reaching Rs 5,254 crore from Rs 4,950 crore in the previous year. Additionally, the bank’s customer base expanded to 5.1 crore as of June 30, 2024, compared to 4.3 crore a year earlier.
Brokerages on Kotak Mahindra Bank
Jefferies on Kotak Mahindra Bank
Jefferies maintains a “Hold” rating on Kotak Mahindra Bank, raising the target price to Rs 1,960 from Rs 1,790. According to Jefferies’ report, net interest margins (NIMs) were disappointing due to rising funding costs.
Loan growth was driven by lower margin segments, while deposit growth remained slower. The performance of the bank’s subsidiaries was bolstered by the capital market segments. Additionally, the report notes that the resolution from the RBI will be a key factor to watch.
Bernstein on Kotak Mahindra Bank
Bernstein maintains a “Market Perform” rating on Kotak Mahindra Bank with a target price of Rs 1,750. According to Bernstein’s report, the bank is battling several headwinds due to RBI restrictions and the external environment.
These restrictions have forced a slowdown in unsecured loans and a decrease in the pace of customer acquisition. While corporate growth has boosted overall loan growth, it has come at the expense of margins.
The timeline for lifting RBI restrictions remains uncertain. As a result, the task of managing growth and profitability is expected to become more challenging going forward.
Motilal Oswal On Kotak Mahindra Bank
Motilal Oswal maintains a “Neutral” rating on Kotak Mahindra Bank with a target price of Rs 1,800, based on 2.0x FY26E ABV plus Rs 575 for subsidiaries.
According to Motilal Oswal’s report, Kotak Mahindra Bank delivered a mixed quarter with earnings in line with estimates, aided by controlled operating expenses, but saw a significant margin contraction of 26 basis points quarter-on-quarter.
Asset quality ratios remained stable, though slippages rose slightly. Moderate growth in unsecured advances impacted yields, but management continues to guide for mid-teens growth in unsecured lending.
Deposit growth has been modest, leading to an increase in the CD ratio to 87.2%. Amid heightened competition for deposits, there is caution regarding the pace of deposit accretion and its impact on margins in the coming quarters.
Despite the RBI ban on its digital sourcing and restrictions on new card issuance, Kotak Mahindra Bank has posted healthy performance. The removal of this ban is deemed critical for sustainable growth and earnings. The report fine-tunes earnings estimates and projects the bank’s RoA/RoE at 2.3%/14.3% by FY26.
(Disclaimer: Views, recommendations, and opinions expressed are personal and do not reflect the official position or policy of Financial Express.com. Readers are advised to consult qualified financial advisors before making any investment decisions. Reproducing this content without permission is prohibited.)