What Analysts Made Of Kotak Mahindra Bank’s Q1 Results
Analysts continue to be bullish on Kotak Mahindra Bank as its asset quality remained stable despite slower loan growth.
Most analysts maintained their bullish investment recommendations for Kotak Mahindra Bank Ltd. as the private lender’s operational performance improved and asset quality remained stable in the June quarter of 2019-20 despite slower loan growth.
The billionaire Uday Kotak-led bank’s net interest income rose 23 percent over last year to Rs 3,173 crore, in line with the Rs 3,168-crore estimate. Its net profit too rose 33 percent year-on-year to Rs 1,360 crore in Q1.
While the bank’s lending to corporate and automobile segments remained sluggish during the quarter, it expects growth to come from consumer lending.
Kotak Mahindra Bank’s gross non-performing assets ratio stood at 2.19 percent in Q1 compared to 2.14 percent as of March 31. Its net NPA ratio dipped to 0.73 percent from 0.75 percent in the March quarter.
Here’s what brokerages have to say about Kotak Mahindra Bank’s Q1 results:
CLSA
- Maintains ‘Buy’ and hikes target price to Rs 1,750 apiece from Rs 1,665.
- CASA franchises aiding healthy growth in operating profit.
- Asset quality stable, weaker trends in subsidiaries.
- Premium valuations justified given better CASA and asset quality.
UBS
- Maintains ‘Buy’ with a target price of Rs 1,650 apiece.
- Strong quarterly performance despite slower loan growth.
- More market share gains with better pricing now.
- The management expects loans to grow around 20 percent.
Macquarie
- Downgrades to ‘Neutral’ from ‘Buy’, cuts target price to Rs 1,400 apiece from Rs 1,445.
- Consolidated loan growth of 15 percent at a 10-quarter low.
- Cuts FY20/21 EPS estimates by 14/19 percent due to slower loan growth and fee income.
Morgan Stanley
- Maintains ‘Overweight’ with a target price of Rs 1,600 apiece.
- Good pre-provisioning operating profit and strong asset quality.
- Loan growth moderated, but guidance broadly unchanged.
- Key positive was 22 percent growth in core pre-provisioning operating profit led by strong net interest income.
SBICAP
- Maintains ‘Sell’ with a target price of Rs 1,276 apiece.
- Steady profit & loss outcomes on the back of balanced loan growth.
- Net interest margins further reflated driven by improving pricing power and reduction in cost of funds.
- Digital initiatives key to operating efficiency.
- Higher cross-sell to drive long-term operating leverage at consolidated level.
Motilal Oswal
- Maintains ‘Neutral’ with a target price of Rs 1,400 apiece.
- In line performance; operating performance remains strong.
- Business growth moderated.
- Expects bank to deliver 23 percent net profit CAGR over FY19-21.
Antique Broking
- Maintains ‘Buy’ with a target price of Rs 1,575 apiece.
- Banking business: continues to give high comfort.
- Earnings trend of subsidiaries was mixed.
- Life insurance and asset management businesses were healthy.
- Strong franchise commands scarcity premium.
Credit Suisse
- Maintains ‘Neutral’ with a target price of Rs 1,340 apiece.
- Margins improve amid growth moderation.
- Asset quality remains stable.