Kotak Mahindra Bank share price falls over 3% after muted Q1 result

The private lender Kotak Mahindra Bank reported a net profit of ₹3,452 crore in the first quarter of FY24, up 67% from ₹2,071 crore in Q1FY23. 

On a consolidated basis, the bank’s net profit rose 50.62% YoY to ₹4,150.19 crore 

Net Interest Income (NII) during the April-June quarter increased to ₹6,234 crore from ₹4,697 crore in Q1FY23, up 33% YoY. Net Interest Margin (NIM) was up 65 bps YoY at 5.57% in Q1FY24, but compressed 18 bps QoQ. The bank’s management has maintained its +5% NIM guidance.

Read here: Kotak Mahindra Bank Q1FY24 results declared. PAT jumps 67%, NII rises 33%

In Q1FY24, the bank’s slippages at ₹1,205 crore increased sharply from around 1.0% run-rate in the last two quarters to 1.5%.

Loan growth was reasonable at 2.7% QoQ and 17.3% YoY.  However, share of unsecured loans including MFI, increased further to 10.7% versus 10% QoQ and 7.9% YoY.

Here’s what brokerages have to say on the stock:

Kotak Mahindra Bank delivered a healthy quarter with steady revenue growth and stable asset quality. NIM contracted due to the rising cost of deposits but was on expected lines. Asset quality remained steady, aided by healthy recoveries, while the restructured book moderated to 20 bps of loans, the brokerage said. 

The brokerage raised its earnings estimates by 7%/5% for FY24/25 and expects Kotak Mahindra Bank to deliver RoA/RoE of 2.4%/14.3% in FY25. 

It reiterated ‘Neutral’ call with a target price of ₹2,170 per share.

Also Read: Reliance Q1 Results: Share price falls 2%; here’s what top domestic and global brokerages say

ICICI Securities noted that there was a substantial rise in slippages and credit costs, which was partly due to higher share of unsecured loans, which are now at 10.7% vs 7.9% YoY. 

“For FY24E-FY25E, we maintain our loan growth estimates at ~18% CAGR and credit cost estimate at 50-60 bps. However, we raise our FY24E/FY25E PAT by 2-3% on higher other income. We estimate 2.2% / 1.9% RoAs for FY24E / FY25E respectively,” ICICI Securities said.

The brokerage maintained ‘Hold’ rating and increased the target price to ₹2,000 per share from ₹1,900 earlier.

Upside risk is higher than expected growth and downside risk is sharp deterioration in asset quality, it said.

Ambit Stock Broking

The brokerage said that the bank’s asset quality was impacted by a seasonal uptick in slippages and credit cost came in at 54 bps. Subsidiaries’ performances ex-life were better than estimated, but the profitability of life insurance business came under pressure, it said.

It retained its ‘Buy’ call with unchanged target price of ₹2,250 per share.

Nuvama Institutional Equities

While PAT beat estimates, there was a miss on core pre-provisions operating profit (PPOPO. Loan growth was tad lower-than-expected, but overall asset growth was strong at 5% QoQ driven by strong deposit growth of 6% QoQ. NIM declined 18 bps QoQ, higher-than-expected, but asset growth was also higher, resulting in in-line NII, the brokerage firm said.

With soft core PPOP and valuation higher-than-peers, the brokerage retained its Hold rating on the stock and kept the target price unchanged at ₹2,140 per share. It expects pressure on CoF to accelerate with sweep deposits.

At 10:05 am, the shares of Kotak Mahindra Bank were trading 3.40% lower at ₹1,904.05 apiece on the BSE.

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Updated: 24 Jul 2023, 10:07 AM IST