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What is the story about?
Shares of Kotak Mahindra Bank Ltd. declined about 3.5% in early trade on Monday, July 20, reacting to the lender's first quarter results.
The private lender's provisioning credit cost almost halved to 0.46%, while its provisions declined 45%, providing a strong boost to its profitability. While the bank's net profit beat estimates, its net interest margins (NIM) witnessed compression but was in-line with estimates.
Meanwhile, brokerages Bernstein and Jefferies indicated an upside of up to 28% for the stock from the previous close.
Kotak Mahindra Bank reported a 25.6% rise in its standalone net profit to ₹4,123 crore, ahead of the CNBC-TV18 poll estimate of ₹3,910 crore.
However, its net interest income (NII) rose 9.2% to ₹7,928 crore, marginally below expectations of ₹8,058 crore. Net interest margin (NIM) contracted to 4.53%, down 14 basis points sequentially and 12 basis points year-on-year, in line with Street expectations.
Asset quality remained stable, with gross NPA improving marginally to 1.18% from 1.20% in March, while net NPA stood at 0.27% versus 0.25% in the previous quarter. Net advances grew 15% year-on-year, while deposits increased 12%, indicating loan growth continued to outpace deposit mobilisation.
Bernstein maintained its 'Market Perform' rating on Kotak Mahindra Bank with a ₹500 target price, implying an upside of around 28% from Friday's closing price.
The brokerage said the lender delivered a steady quarter with broad-based loan growth and stable asset quality, but noted that margin trends remained under pressure.
It also highlighted that deposit growth lagged peers, loan growth was no longer outpacing rivals, and elevated capital levels increased further, even as earnings were supported by cost discipline and lower credit costs.
Jefferies reiterated its 'Buy' rating with a ₹460 target, saying standalone profit exceeded estimates due to stronger NII, fee income and lower credit costs. The target price implies an 18% upside from Friday's close.
The brokerage said credit quality continues to improve, particularly in the microfinance and credit card portfolios, and raised its FY27 EPS estimates by 2% to reflect better fee income and operating expenses. It added that clarity on the bank's next CEO remains a key catalyst, while valuations remain reasonable.
Morgan Stanley said Kotak Mahindra Bank's NIM was in line with expectations and that the overall performance was better than its forecasts.
According to Bloomberg analyst data, 35 of 43 analysts covering the stock have a 'Buy' recommendation, while six suggest 'Hold' and two recommend 'Sell'. The consensus 12-month target price stands at ₹462.49, implying an upside of about 18.6% from Friday's closing price.
The stock fell as much as 3.5%, reaching the day's low of ₹376.10 on Monday morning, before trimming losses to trade at ₹382, down 2.04% at 10:44 am.
Read more: Why this $3.6 billion fund turned long on RIL after 4 years
The private lender's provisioning credit cost almost halved to 0.46%, while its provisions declined 45%, providing a strong boost to its profitability. While the bank's net profit beat estimates, its net interest margins (NIM) witnessed compression but was in-line with estimates.
Meanwhile, brokerages Bernstein and Jefferies indicated an upside of up to 28% for the stock from the previous close.
Q4 Results
Kotak Mahindra Bank reported a 25.6% rise in its standalone net profit to ₹4,123 crore, ahead of the CNBC-TV18 poll estimate of ₹3,910 crore.
However, its net interest income (NII) rose 9.2% to ₹7,928 crore, marginally below expectations of ₹8,058 crore. Net interest margin (NIM) contracted to 4.53%, down 14 basis points sequentially and 12 basis points year-on-year, in line with Street expectations.
Asset quality remained stable, with gross NPA improving marginally to 1.18% from 1.20% in March, while net NPA stood at 0.27% versus 0.25% in the previous quarter. Net advances grew 15% year-on-year, while deposits increased 12%, indicating loan growth continued to outpace deposit mobilisation.
Brokerages' constructive on Kotak
Bernstein maintained its 'Market Perform' rating on Kotak Mahindra Bank with a ₹500 target price, implying an upside of around 28% from Friday's closing price.
The brokerage said the lender delivered a steady quarter with broad-based loan growth and stable asset quality, but noted that margin trends remained under pressure.
It also highlighted that deposit growth lagged peers, loan growth was no longer outpacing rivals, and elevated capital levels increased further, even as earnings were supported by cost discipline and lower credit costs.
Jefferies reiterated its 'Buy' rating with a ₹460 target, saying standalone profit exceeded estimates due to stronger NII, fee income and lower credit costs. The target price implies an 18% upside from Friday's close.
The brokerage said credit quality continues to improve, particularly in the microfinance and credit card portfolios, and raised its FY27 EPS estimates by 2% to reflect better fee income and operating expenses. It added that clarity on the bank's next CEO remains a key catalyst, while valuations remain reasonable.
Morgan Stanley said Kotak Mahindra Bank's NIM was in line with expectations and that the overall performance was better than its forecasts.
According to Bloomberg analyst data, 35 of 43 analysts covering the stock have a 'Buy' recommendation, while six suggest 'Hold' and two recommend 'Sell'. The consensus 12-month target price stands at ₹462.49, implying an upside of about 18.6% from Friday's closing price.
Stock reaction
The stock fell as much as 3.5%, reaching the day's low of ₹376.10 on Monday morning, before trimming losses to trade at ₹382, down 2.04% at 10:44 am.
Read more: Why this $3.6 billion fund turned long on RIL after 4 years
