MOSL: KOTAK MAHINDRA BANK (Neutral)-Loan growth accelerates further, margin cycle set to reverse
KOTAK MAHINDRA BANK: Loan growth accelerates further, margin cycle set to reverse
(KMB IN, Mkt Cap USD33.9b, CMP INR1267, TP INR1350, 6% Upside, Neutral)
- Standalone results: Provision write-backs and healthy NII helped KMB to report strong 3QFY19 PAT of INR12.9b (+23% YoY, marginally ahead of our estimate). NII grew 23% YoY to INR29.4b, led by healthy loan growth of 23% YoY/6% QoQ and margin expansion of 13bp QoQ to 4.33%. For 9MFY19, PPoP grew 18.0%, while PAT increased 17% YoY.
- Loan book grew 23.5% YoY, led by strong growth in retail loans (+25% YoY) and corporate loans (+22.5% YoY), while deposits grew 18% YoY (CASA deposits up 28.5% YoY). SA deposits continue growing strongly by 31% YoY (SA cost of 5.67%). Core deposit mix (CASA + TD < INR50m) stood at 80% of total deposits. CASA mix improved to 50.7%.
- Asset quality improved, with NNPA declining by 6.9% QoQ. The bank made provisions of INR2.5b toward advances v/s our estimate of INR3.6b. However, KMB reported negative provisions (-INR0.3b) due to write-backs of INR2.7b on the investment portfolio (AFS and HFT category). GNPL/NNPL ratios stood at 2.07%/0.71% (-8bp/-10bp), while PCR improved by 337bp QoQ to 66.2%.
- Subs performance remains mixed: Kotak Life reported 29% YoY growth in its net profit, while Kotak AMC reported 100% YoY growth on a low base. Kotak Prime and Securities, however, reported de-growth of 6/36% YoY. Share of the bank in consol. profit stood at 70%. Consol. PAT grew 14% YoY to INR18.44b.
Kotak Mahindra Bank is principally engaged in commercial banking activities. Co.'s services are provided through branch banking, telephone banking, internet banking, mobile banking, direct pay services, payment gateway for online shopping, a global debit card, a prepaid spending card and facility to transfer of funds to all Visa debit and credit cards in India. As of Mar 31 2007, Co.'s total assets and deposits was IRs286,308,094,000 and IRs96,609,722,000 respectively. In additions, Co. had 105 branches and 135 ATMs in 69 locations throughout India.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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