Kotak Mahindra Bank
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27 July 2020
1QFY21 Results Update | Sector: Financials
TP: INR1,300 (-2%)
Moratorium book plunges; Loan book declines sharply
Remain watchful of asset quality trajectory
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
Financials & Valuations (INR b)
EPS Gr. (%)
Cons. BV. (INR)
Cons. RoE (%)
P/BV (X) (Cons.)
P/ABV (X) (Adj.)
2616.9 / 35.7
1740 / 1000
KMB reported a mixed quarter with weak earnings performance, affected
by lower fee income, 32bp QoQ decline in margins and sharp sequential
decline in loan growth. On the asset quality front, slippages were elevated,
driving 45bp QoQ increase in GNPA ratio while provision coverage remained
broadly stable. Moratorium 2.0 declined to 9.65% with 95% coming from
moratorium 1.0. However, moratorium figures are not comparable due to a
different computation methodology used across banks.
On the business front, loan book declined 7% QoQ, affected by the (a)
lockdown, and (b) bank’s cautious approach in a weak macro environment.
SA deposits’ growth was steady, driving further improvement in CASA mix
We have cut our PAT estimate for FY21/22E by 10%/11%, primarily to factor
in higher credit cost, lower growth and other income. Maintain
KMB reported 9% YoY decline in 1QFY21 standalone PAT to INR12.4b (6%
below our estimates), affected by higher decline in other income and
elevated provisions toward COVID-19 of INR6.2b. KMB, thus, has total
COVID-19 provisions of INR12.6b (0.6% of advances).
NII grew ~17% YoY to INR37.2b (in-line) while margins contracted 32bp QoQ
to ~4.4%. Other income declined 41% YoY, affected by lower fee income
(33% YoY decline). Opex also decreased 10% YoY (19% QoQ decline),
resulting in PPoP growth of 9% YoY.
Loan book declined 2% YoY (7% QoQ decline) to INR2.0t while deposits
increased 12% YoY to INR2.6t. CASA deposits grew ~26% YoY and CASA mix,
thus, improved to 56.7% (v/s 56.2% in FY20). CASA + TD (below INR50m)
mix increased to ~90% of total deposits (v/s 86% in 4QFY20).
On the asset quality front, slippages came in at ~INR8.0b (1.5% annualized).
Thus, GNPA/NNPA ratio increased 45bp/16bp QoQ to ~2.7%/0.9%. PCR
ratio was broadly stable at ~68%. SMA-2 advances stood at ~INR1b (5bp of
declined to ~9.7% of loans as on 30
Jun’20 (v/s 26% in
Apr’20). ~95% of loans under moratorium 2.0 were from moratorium 1.0.
Further, ~80% of loans are secured under moratorium 2.0.
reported mixed performance with PAT declining 56% YoY for
Kotak Prime, 20% YoY increase for Kotak Life and 54% YoY increase for
Focus remains on assessing the viability of the borrower
(ability to repay). Customers who seem unviable have not been provided
the moratorium 2.0 and the bank prudently recognized the stress earlier.
Thus, this resulted in some of the accounts slipping during the quarter.
Loan book declines; Moratorium portfolio plunges to ~9.7%
*Adjusted for Investment subs
Shareholding pattern (%)
FII Includes depository receipts
Highlights from management commentary
Research Analyst: Nitin Aggarwal
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.