Q3FY23 standalone earnings of Kotak Mahindra Bank (KMB) were 3% above estimates of IIFL Securities, led by stronger-than-expected margin performance and lower provisions partially offset by higher opex. Sequential loan growth was higher than peer banks and deposit growth too kept pace in terms of QoQ growth, unlike larger peers. Asset quality continued to improve and KMB has among the lowest restructured portfolios for private banks. Step-up in PCR to ~78% and additional provisions at ~0.6% of loans, should aid in keeping earnings insulated from volatility going forward.
Overall, analysts at IIFL Securities have revised their standalone earnings estimates by 1-2% and expect the bank to report RoA/RoE of ~2.1/13.5% by end FY25.
KMB is among the best capitalized banks with a Tier-1 CAR of ~22% and has best-in-class ROAs of ~2.3% (for FY23). Growth trajectory continues to remain positive, especially with the bank showing higher risk appetite for Unsecured Retail loans. While analysts at IIFL Securities are optimistic on loan growth and the asset quality outlook going forward, valuations already reflect this at 2.8x FY24 estimated consolidated BVPS. Their September-2024- based SOTP stands at Rs2,030. They have maintained Add recommendation on the stock.
