Kotak Mahindra Bank
22 July 2019
1QFY20 Results Update | Sector: Financials-Banks
TP: INR1,400 (-4%)
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In-line performance; loan growth outlook softens
KMB reported 1QFY20 standalone PAT of INR13.6b (+33% YoY, in-line).
Consol. PAT stood at INR19.3b (+23% YoY).
NII grew 23% YoY to INR31.7b (in-line), led by healthy margins of 4.5%
(+20bp YoY, flattish QoQ). Other income increased 12% YoY to INR13.1b.
Loan book growth came in lower than expected at 18% YoY to INR2.2t and
reflected the slowdown being reported by a few other banks. Moderation in
loan growth can mainly be attributed to a 4% QoQ decline in agri loans and
slower growth in the corporate/BB, CV and personal loan segments.
Average SA deposits grew 21% YoY, while average CA balances were up 23%
YoY. CASA mix stood at 50.7% (52.5% in 4QFY19). Cost of SA declined
sequentially by 15bp to 5.5% aided by reduction in SA rate for balance
below INR1 lac. Post the recent Supreme Court ruling and the change in
regulation, the bank has begun sourcing 811 accounts on the basis of
voluntary use of Aadhaar. The monthly acquisition run-rate, thus, has
already reached the levels prior to this change.
GNPLs increased 3.3% QoQ, while net NPLs declined 1.3% QoQ. PCR ratio,
thus, improved 150bp QoQ to 67%. SMA-2 advances stood at INR3.3b (16bp
of loans v/s 7bp in 4QFY19).
(a) Tier 1 ratio stood at 17.3% (+40bp QoQ). (b) Opex
increased 21% YoY/2% QoQ to INR20.8b. C/I ratio, thus, improved 72bp
QoQ to 46.4%. (c)
KMCC and AMC reported 80%/43% YoY
PAT growth, while Kotak Securities reported a 15% YoY decline.
KMB's operating performance remains strong, although
business growth has shown moderation, reflecting the weakness in the
consumption-linked lending segments and the cautious stance on
corporate/BB and certain segments of agri. We expect the bank to deliver
23% PAT CAGR over FY19-21, led by stable/improving margins and a further
improvement in operating leverage. We estimate FY21 consol. RoA/RoE at
2.2%/13.4%. We continue believing in KMB's capability to deliver in a
challenging environment and appreciate the progress the bank is making in
building a strong liability franchise. Maintain
with a TP of INR1,400
(3.8x FY21E ABV for the bank).
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
2775.7 / 40.3
1555 / 1002
Financials & Valuations (INR b)
FY19 FY20E FY21E
112.6 138.9 168.8
83.5 104.7 129.5
EPS Gr. (%)
222.1 252.5 290.2
203.2 231.0 265.2
Cons. BV. (INR)
302.7 346.0 399.0
Cons. ABV. (INR)
291.3 333.4 384.6
Cons. RoE (%)
P/BV (X) (Cons.)
P/ABV (X) (Cons.)
P/ABV (X) (Adj.)
*Price adjusted for Investment in subsidiaries
Research Analyst: Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com); +91 22 6129 1542 |
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.