ICICI Direct has given Buy recommendation for Kotak Mahindra Bank with a target price of Rs. 2040 in its research report issued on May 04, 2021

ICICI Direct’s research report on Kotak Mahindra Bank

Kotak Mahindra Bank reported a mixed set of numbers on the operating front while credit growth trajectory on a sequential basis was maintained. Kotak Bank posted lower-than-expected NII growth at 8.0% YoY to Rs 3842 crore, mainly on account of 34 bps YoY and 19 bps QoQ decline in net interest margins. The bank took a hit of ~Rs 110 crore in NI line for relief on interest on interest. Non-interest income (NII) reported a sharp jump of 31% YoY, 51% QoQ to Rs 1949 crore, driven by 23% QoQ rise in fee income and treasury gains (PBT level) of Rs 898 crore vs. Rs 48 crore QoQ. Cost to income ratio declined ~258 bps YoY with 9.4% QoQ reduction in employee expenses due to lower retirement benefits due to improved interest rates. The bank made elevated provisions worth Rs 1179 crore, up 181% QoQ. Thus, PAT came in at Rs 1682 crore, slightly below our estimates.

Outlook

We maintain our BUY rating with an SOTP target price of Rs 2040 (unchanged).