Shares of Kotak Mahindra Bank climbed more than 2 percent in trade on BSE on May 5 and looked on course to extend the gains into the second consecutive session.
The bank on May 4 reported a net profit of ₹2,767 crore for Q4FY22, up 65 percent from ₹1,682 crore in Q4FY21, on a standalone basis.
The bank's net interest income (NII) increased to ₹4,521 crore, from ₹3,843 crore in Q4FY21, up 18 percent. Net Interest Margin (NIM) was 4.78 percent for Q4FY22. Fees and services for Q4FY22 were ₹1,697 crore, up 23 percent year-on-year (YoY).
The bank said it had reversed the Covid-19 provision of ₹453 crore during the quarter. However, as of March 31, 2022, Covid-related provisions stood at ₹547 crore, the bank said.
Brokerages remain mixed
Morgan Stanley has an 'equal-weight' call on the stock with a target price of ₹1965. As per CNBC-TV18, Morgan Stanley said the equal-weight call reflects valuation and relative risk reward. The global brokerage firm sees the bank's core PPoP at 22 percent CAGR over FY22-24 against 4 percent in FY21-22.
CLSA has a 'buy' call on the stock with a target price of ₹2200, citing strong growth and NIM performance in Q4. CLSA underscored, as per CNBC-TV18, that the bank's asset quality continues to improve leading to provision reversals.
Jefferies also has a 'buy' rating on Kotak Mahindra Bank, reported CNBC-TV18. But the global brokerage firm added that growth and clarity on succession are the key monitorable for the stock.
Among the domestic brokerage firms, Nirmal Bang has a 'buy' call on the stock with a target price of ₹2,134.
"In view of the strong quarter-on-quarter (QoQ) credit growth, the build-up in deposits was tepid. However, the bank has indicated that it would take efforts to step up deposits growth going forward," said Nirmal Bang.
"While it may seem that the record margins came on the back of maxing out the C/D ratio, we note that the bank is still sitting on an average LCR of nearly 130 percent. Further, there is good scope for increasing high-margin unsecured exposure," the brokerage added.
"Opex growth (YoY) indicates strong customer acquisition (nearly doubled in 4QFY22). Mortgages and unsecured consumer loans saw strong traction. Asset quality continued to improve with credit cost coming off YoY and NPA ratios declining further QoQ. SMA numbers seem under control, indicating a positive asset quality outlook. While the management had sounded positive on loan growth, calibrated growth in deposits/liabilities would be a key monitorable, along with how the bank approaches its liability pricing strategy," said Nirmal Bang.
Another brokerage firm Motilal Oswal Financial Services has a 'neutral' call on the stock with a target price of ₹2,000, citing the bank delivered a healthy core operating performance and broad-based loan growth.
"The bank continues to demonstrate steady progress in building a strong liability franchise, with CASA ratio standing nearly 61 percent (highest in the industry). This positions it favorably in a rising rate environment and will enable it to grow competitively in its chosen business segments," said Motilal Oswal.
"Asset quality stays robust, with a further dip in GNPA/NNPA and an improvement in PCR, while the restructured book remains under control nearly 0.44 percent of loans. We fine-tune our earnings and estimate the bank to deliver 15 percent earnings CAGR over FY22-24," said the brokerage firm.
Brokerage firm JM Financial also has a 'buy' call on the stock but cut the target price to ₹1,975 from ₹2,300.
The brokerage firm said the bank's thrust on loan growth continued (up 21 percent YoY and 7 percent QoQ) driven by strong growth across segments and management expects the growth to sustain going ahead.
"In our view, while Kotak Mahindra Bank has a strong liability profile, it will need to continue working towards improving the deposit growth momentum in order to sustain its future growth aspirations. Kotak continues to run a clean balance sheet and we expect the credit costs to moderate going ahead (average of 0.6 percent over FY23-24E)," said JM Financial.
"We remain positive on Kotak Bank’s higher loan growth strategy, clean balance sheet and strong liabilities franchise
with a prudent focus on risk-adjusted returns. However, clarity on succession remains a key monitorable which will limit significant rerating from current valuations," the brokerage firm added.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies and not of MintGenie.