Kotak Mahindra Bank
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
2269.8 / 29.4
1740 / 1000
13 May 2020
4QFY20 Results Update | Sector: Financials
CMP: INR1,187 TP: INR1,350 (+14%)
Liability franchise strengthens; Well-positioned to navigate
Continued caution on loan growth
Financials & Valuations (INR b)
FY20 FY21E FY22E
135.1 149.0 169.6
100.2 108.4 123.8
EPS Gr. (%)
234.0 253.6 286.8
Cons. BV. (INR)
348.3 392.2 446.8
Cons. RoE (%)
P/BV (X) (Cons.)
P/ABV (X) (Adj.)
Loan growth remains muted as KMB continues to be cautious in a weak
macro environment, further aggravated by the COVID-19 crisis. On the
other hand, deposit growth remains strong, with the CASA ratio scaling new
heights. On the asset quality front, 26% of the portfolio availed moratorium.
Moreover, the standstill benefit enabled 90dpd loans worth INR6.6b to
continue as standard. Overall, operating performance stood healthy, with
PPOP growing at 19% YoY, although provisions for COVID-19 affected
We cut our PAT estimate for FY21/22 by 14%/8%, primarily as we factor in
higher credit cost. Maintain
COVID-19 provision drags earnings; moratorium book stands at 26%,
comparable with larger peers
*Adjusted for Investment subs
Shareholding pattern (%)
FII Includes depository receipts
KMB reported 10% YoY decline in 4QFY20 standalone PAT at INR12.67b,
affected by higher provisions toward COVID-19 of INR6.5b @ 10% of
overdue loans, against which the standstill benefit is availed.
NII grew at ~17% YoY to INR35.6b, supported by stable margins at 4.72%
(26bp YoY increase). Opex growth stood at 14% YoY (~2% QoQ decline) to
INR23.2b. The C/I ratio thus improved by ~400bp QoQ and came in at 46%.
In FY20, NII/PPoP grew at 20% YoY each and PAT 22% YoY.
Loan growth moderated ~7% YoY to INR2.2t, reflecting slowdown in the
business environment, further aggravated due to lockdown in 2H Mar’20.
On the other hand, deposits witnessed strong traction at 16.4% YoY / 9.8%
QoQ to INR2.6t. CASA deposits grew at ~24% YoY, with the CASA mix thus
improving to 56.2% (53.7% in 3QFY20). CASA + TDs (below INR50m) form
~86% of the total deposits. The current account opening run-rate stands
comparable with FY20, led by continued momentum through the 811
On the asset quality front, slippages came in at INR4.9b as the standstill
benefit aided 90dpd loans worth INR6.6b to continue being counted as
standard. The GNPA/NNPA ratio thus declined 21bp/18bp QoQ to
~2.3%/0.7%, while the PCR ratio consequently improved 460bp QoQ to
~69%. SMA-2 advances stood at ~INR1b (4bp of loans).
26% of borrowers by value at the account level had
availed moratorium as of 30
They reported mixed performances, with PAT declining 2%
YoY (14% QoQ decline) for Kotak Prime, and increasing 20% YoY for Kotak
Life as well as 47% YoY for Kotak Securities.
Research Analyst: Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com); +91 22 6129 1542 |
14 January 2020
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.