Kotak Bank recorded an 18.22% year-on-year (YoY) rise in standalone profit for the quarter ending March 2024, reaching Rs 4,133.30 crore, with net interest income (NII) increasing by 13% YoY to Rs 6,909 crore in Q4.
Kotak Mahindra Bank shares surged up to 4.2% to reach a day’s high of Rs 1,612.30 on BSE as brokerages initiated upgrades for the private lender following its strong Q4 performance, despite concerns over recent senior management departures and RBI disapproval.
Nomura raised its rating from neutral to buy and set a target price of Rs 2,040, citing the opportunity to acquire a high-quality stock at a discounted price.
Analyst Perspectives on Kotak Bank’s Q4 Performance and Outlook:
Nomura stated that Kotak’s Q4 performance surpassed expectations, with a PBT exceeding estimates by 10% (after adjustments), showcasing sector-leading RoA (2.6% adjusted) and deposit growth (+24% YoY). The management emphasized resolving IT issues as a top priority, expecting RBI’s embargo to minimally impact P&L (~INR 3-4.5bn, approximately 2% of FY25E PBT).
JP Morgan upgraded the stock to overweight from neutral, setting a target price of Rs 2,070 based on favorable valuations.
“We anticipate Kotak Mahindra Bank to sustain a 16% CAGR in balance sheet expansion over the next 2 years, with potential for earnings growth at a similar rate even with a ROA normalization decline. Improved operational expenditure management could further drive upside. At a parent P/E of 10x F26E, valuations are attractive for a high-quality, growth-oriented franchise,” stated JP Morgan analysts.
Kotak’s standalone profit surged by 18.22% YoY to Rs 4,133.30 crore in Q4 March 2024, while net interest income (NII) increased by 13% YoY to Rs 6,909 crore.
Asset quality showed improvement, with GNPA/NNPA at 1.4/0.3% compared to 1.7/0.3% QoQ.
Analyst Perspectives and Market Performance of Kotak Mahindra Bank:
Jefferies maintains hold rating on Kotak, lowers target price to Rs 1,790.
Axis Securities reduces target price to Rs 1,755 from Rs 2,140, citing uncertainties regarding regulatory relaxation timeline and top-level management stability, which may impact near-term stock performance.
Motilal Oswal shares a similar view, citing absence of near-term triggers, watchful stance on execution, lifting of RBI restrictions, and management stability, which may constrain near-term performance.
Kotak Bank shares have been lagging, declining over 9% in three years compared to Sensex’s 51% surge. The stock hit a 52-week low of Rs 1,544.15 on Friday before rebounding today.
Regarding the effect of RBI restrictions on new customer onboarding via online and mobile banking channels and issuance of fresh credit cards, management anticipates minimal business impact. If the restrictions persist for a year, Kotak forecasts a Rs 300-450 crore impact, factoring in increased tech expenditures and financial repercussions of the restrictions.
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