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MOSL: KOTAK MAHINDRA BANK (Neutral)-In-line performance-loan growth outlook softens

KOTAK MAHINDRA BANK: In-line performance; loan growth outlook softens

(KMB IN, Mkt Cap USD40.3b, CMP INR1454, TP INR1400, 4% Downside, Neutral)

 

• KMB reported 1QFY20 standalone PAT of INR13.6b (+33% YoY, in-line). Consol. PAT stood at INR19.3b (+23% YoY).
• NII grew 23% YoY to INR31.7b (in-line), led by healthy margins of 4.5% (+20bp YoY, flattish QoQ). Other income increased 12% YoY to INR13.1b.
• Loan book growth came in lower than expected at 18% YoY to INR2.2t and reflected the slowdown being reported by a few other banks. Moderation in loan growth can mainly be attributed to a 4% QoQ decline in agri loans and slower growth in the corporate/BB, CV and personal loan segments.
• Average SA deposits grew 21% YoY, while average CA balances were up 23% YoY. CASA mix stood at 50.7% (52.5% in 4QFY19). Cost of SA declined sequentially by 15bp to 5.5% aided by reduction in SA rate for balance below INR1 lac. Post the recent Supreme Court ruling and the change in regulation, the bank has begun sourcing 811 accounts on the basis of voluntary use of Aadhaar. The monthly acquisition run-rate, thus, has already reached the levels prior to this change.
• GNPLs increased 3.3% QoQ, while net NPLs declined 1.3% QoQ. PCR ratio, thus, improved 150bp QoQ to 67%. SMA-2 advances stood at INR3.3b (16bp of loans v/s 7bp in 4QFY19).
• Other highlights: (a) Tier 1 ratio stood at 17.3% (+40bp QoQ). (b) Opex increased 21% YoY/2% QoQ to INR20.8b. C/I ratio, thus, improved 72bp QoQ to 46.4%. (c) Amongst subs, KMCC and AMC reported 80%/43% YoY PAT growth, while Kotak Securities reported a 15% YoY decline.