Kotak Mahindra Bank jumps over 4% on strong Q4: Here’s what top brokerages say

Today, share price of Kotak Mahindra Bank surged by 4.76% to reach an intra-day high of Rs 1,622.50 per share on the NSE. (Photo: Bloomberg)

In early trading on Monday, Kotak Mahindra Bank’s stock surged by over 4%, following the private sector lender’s release of Q4 results that exceeded expectations. Shares of Kotak Mahindra Bank rallied by 4.76% to reach Rs 1,622.50 apiece on the NSE.

In the quarter ending March 2024, Kotak Mahindra Bank recorded a standalone profit of Rs 4,133.30 crore, marking a year-on-year (YoY) growth of 18.22%. Meanwhile, its net interest income (NII) witnessed a 13% YoY increase, reaching Rs 6,909 crore.

Whereas in Q4FY24, Kotak Mahindra Bank’s net interest margin (NIM) increased to 5.28% from 5.22% in Q3FY24.

Brokerages on Kotak Mahindra Bank 

Motilal Oswal on Kotak Mahindra Bank

According to a report by Motilal Oswal on Kotak Mahindra Bank, the bank has delivered a steady quarter, surpassing expectations on earnings and showing sequential improvement in margins.

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Motilal Oswal’s report fine-tunes earnings estimates, estimating Kotak Mahindra Bank’s RoA/RoE at 2.3%/14.1% by FY26. The report reiterates a Neutral stance with a target price of Rs 1,700, based on 1.8x FY26E ABV + Rs 565 for subsidiaries.

The report highlights an enhancement in the asset quality ratio, attributed to aggressive write-offs, although there was a slight uptick in slippages. Kotak Mahindra Bank is projecting consistent growth, particularly in unsecured lending, with confidence in the quality of its portfolio.

Management has assured minimal business impact from recent RBI restrictions, with a focus on restoring operations to normalcy. Despite recent sharp corrections in the stock price, Motilal Oswal sees a favorable risk-reward scenario.

However, the report suggests caution due to the absence of near-term catalysts and a cautious stance on execution, the lifting of RBI restrictions, and management stability, which could constrain short-term performance.

Nuvama on Kotak Mahindra Bank

Although slippages rose QoQ, gross non-performing loans (GNPL) declined due to a substantial write-off of Rs 15 billion. Given the one-offs and the digital ban impact, Nuvama maintains a ‘REDUCE’ rating and a target price (TP) of Rs 1,530.

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Profit after tax (PAT) surged by 38% quarter-on-quarter (QoQ), exceeding estimates by 14%. Adjusted for one-offs, profit before tax (PBT) was 3% higher than anticipated, driven by a significant distribution fee.

While net interest margin (NIM) witnessed a 6 basis points (bp) increase QoQ, core NIM declined by 5bp. Deposit growth was skewed towards the end of the period, with average current account (CA) growth at 1.4% compared to a period-end of 9%.

While the CEO mentioned a low net-PBT impact of approximately Rs 4.5 billion from the digital ban, uncertainties persist regarding its effect on customer acquisition, yields, asset growth, and the necessary adjustments to business as usual operating expenses to sustain technology spending at 10% of total expenses.

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