Kotak Mahindra Bank posts 31% spike in Q3 net: What should you do with the stock?

Kotak Mahindra Bank Q3: Net interest income surged 30 percent to Rs 5,653 crore in the December quarter against Rs 4,334 crore in the same quarter of the previous year.

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The share price of Kotak Mahindra Bank will react to its December quarter earnings declared on January 21.

Kotak Mahindra Bank beat the Street estimates with a 31 percent growth in net profit at Rs 2,792 crore for the October-December quarter over the year-ago period.

The bank’s net interest income surged 30 percent to Rs 5,653 crore in the December quarter as against Rs 4,334 crore in the same quarter a year back.

The spike in NII comes on the back of a year-on-year growth of 23 percent in loans and a jump in net interest margin to 5.47 percent from 4.62 percent.

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Here is what brokerages have to say about stock and the company after its December quarter earnings:

Prabhudas Lilladhar

Changed rating to ‘buy’ from ‘accumulate’ and kept the target price unchanged at Rs 2,100.

The bank saw a strong quarter as core earnings at Rs 26 billion, beating broking house estimates by 6 percent driven by higher NIM at 5.43 percent (PLe 5.2 percent) which was a function of lower cost of funds that came in at 3.83 percent (PLe 4.1 percent).

Credit growth was a tad higher at 5.7 percent QoQ driven by corporate (+6.8 percent) and retail (+6.0 percent).

With continued traction in PL/CC and MFI, bank expects unsecured share to increase from 9.3 percent to early-mid teens in FY24 which would also protect margins.

CLSA

Broking firm has maintained ‘Outperform’ rating on the stocks with a target at Rs 2,080 per share as the Q3 was robust with a big NII beat and growth remains strong.

The management confident in delivering an increasing share of unsecured book at a fast clip, while clarity on CEO transition & improving retail liability accretion will be key, reported CNBC-TV18.

Bernstein

Research house has kept ‘market perform’ rating on the stock with a target at Rs 2,100 per share.

The strong margin expansion driven by healthy credit growth & continued loan mix shift and healthy Q3 EPS growth driven by a healthy credit growth and significant margin expansion.

The surge in retail segments and micro-finance helped credit growth and margin expansion and NII growth and normalisation of treasury gains translated rise in total income, reported CNBC-TV18.

Morgan Stanley

Brokerage firm has maintained ‘equal weight’ rating on the stock with a target at Rs 2,215 per share. The asset quality, loan growth and margin continue to surprise, albeit were partially offset by higher than expected operating costs.

The deposit growth accelerating and expect positive jaws in FY24 and continue to expect strong earnings, reported CNBC-TV18.

JP Morgan

Research house has kept ‘neutral’ rating with a target at Rs 2,070 per share.

The standalone net income came above estimates on better NIM and lower provisions, while revenue growth was driven by NIMs and loan growth.

The bank has reinvested gains to increase opex and asset quality continues to be solid with negative net slippages. The credit costs aided by a small drawdown in reserves, reported CNBC-TV18.

Jefferies

Brokerage house has maintained the ‘buy’ rating on the stock with a target at Rs 2,470 per share as the Q3 profit ahead of estimates with stronger than expected NIM expansion and lower credit cost.

The strong loan growth aided by buoyancy in credit and ramp-up in unsecured loans. The CASA has lagged as bank lost share in bulkier savings deposits.

The asset quality stays robust, sub performance was relatively weak.

Broking house raises estimates by 3-7 percent and clarity on succession will be key to re-rating, reported CNBC-TV18.

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