EUR 120.00 For Business Accounts Only

MOSL: KOTAK MAHINDRA BANK (Neutral)-Steady performance across businesses, margins improve sequentially

Kotak Mahindra Bank: Steady performance across businesses, margins improve sequentially

(KMB IN, Mkt Cap USD38.1b, CMP INR1387, TP INR1450, 5% Upside, Neutral)

• KMB reported PAT of INR14.1b (+25% YoY, in-line) on account of healthy loan growth, improved margins and lower provisions. NII grew 18% YoY to INR30.5b, as the margin expanded 15bp QoQ/13bp YoY to 4.48%. For FY19, NII/PPoP/PAT grew 18%/17%/19%.
• Loan book grew 21% YoY, led by strong growth in retail loans across segments and corporate banking (+19% YoY), while deposits increased 17% YoY (CASA deposits up 21.3% YoY). SA deposits continued growing strongly by 22% YoY (SA cost of 5.66%). Core deposit mix (CASA + TD < INR50m) stood at 81% of total deposits. CASA mix improved to 52.5% (+180bp QoQ).
• GNPA/NNPA increased by 8.2%/10.5% QoQ, resulting in a marginal rise in the GNPL/NNPL ratios to 2.14%/0.75% (+7bp/+4bp), while PCR moderated marginally by 72bp QoQ to 65.4%.
• Life insurance business delivers strong EV growth; other subs performance mixed: Kotak Life reported net profit growth of 21% YoY (25% YoY growth in EV), while Kotak AMC delivered 92% YoY growth. Kotak Prime PAT grew 2.5% YoY, while Kotak Securities reported a decline of 17% YoY. Consol. PAT grew 14% YoY to INR20.38b (share of the bank at 69%).
• Other highlights: (a) KMB reported a Tier 1 ratio of 16.9% (CAR of 17.5%). (b) SMA-2 advances declined to 7bp of loans. (c) According to Basel III, the exposure toward NBFCs/CRE (ex LRD) has come down to 4.0%/1.7% from 5.1%/1.9% in FY18. (d) Growth is stagnant in the business bank segment.