Kotak Bank shares tank 3% after Q1 results; Should you buy, sell or hold Kotak stock- Check brokerage calls

Kotak Bank shares tank 3% after Q1 results; Should you buy, sell or hold Kotak stock? Check brokerage calls

Kotak Bank’s stock price witnessed a sharp decline after the bank released its quarterly performance for the current fiscal year. The stock price tanked as much as 3.38% or Rs 66.65 today to close at Rs 1,893.85. The private lending bank published its performance for the June quarter on July 22, 2023. According to the report, the bank’s net profit in the quarter ending in June, stood at Rs 3,452 crore surpassing Bloomberg’s estimate of Rs 3,219.5 crore led by a higher yield on loans and investments. Brokerages largely recommended a ‘buy’ call on Kotak Bank stocks, citing strong results and business growth.Kotak Bank stock call: Should you buy, sell or hold Kotak Bank sharesHDFC Securities: BUY

“Kotak Mahindra Bank (KMB) delivered a strong beat, driven by healthy loan growth (+17% YoY) and trading gains, partly offset by marginally higher credit cost (~50bps annualised). Loan growth (including wholesale) was broad-based across segments, with continued traction in unsecured retail (10.6% of loans) in line with KMB’s efforts to improve its share of high-yield products. Deposit mobilisation picked up the pace (+6% QoQ), primarily from the active money pool, addressing an immediate concern around elevated loan-to-deposit ratio even as the CASA ratio witnessed a sharp 400bps QoQ moderation (49%). While KMB’s move to chase better yields through a higher mix of unsecured has merit, we see challenges around elevated funding costs. We tweak our FY24/FY25 estimates to factor in higher opex and credit costs, offset by slightly better NIMs from change in mix; maintain ADD with an SOTP-based target price of INR2,205 (standalone bank at 3x Mar-25 ABVPS).”

“Kotak Mahindra Bank (KMB) reported strong 1QFY24 results and the key pointers are: a) strong NII (up 33% YoY and 2% QoQ) and seasonally higher provisions, b) GNPA/NNPA ratio stable at 1.77%/0.44%, c) restructured pool inched down to ₹6.1bn (19bps of advances) v/s ₹7.2bn in the previous quarter, d) credit off-take strong with growth of 17.3% YoY and 2.7% sequentially, e) covid provision held at ₹3.4bn as of 4QFY23, provision write-back worth ₹50mn, f) the total contingent provisioning (covid + Standard + Specific) stood 0.6% of net advances, h) Total PCR (including covid, general and specific provision) stood ~110% of GNPL amount, g) Headline NIM inched down 18bps QoQ to 5.57%. Moreover, stable Opex (C/I at 44.5%) led to a superior ROA of ~2.8%. However, employee attrition is higher than peers and has a relatively weak liability franchise (v/s peers: HDFCB and ICICIB) that will be tested in FY24E as deposit competition is intensifying. Nevertheless, asset quality provides comfort for lower credit costs. Hence, the peak ROA (~3% in 4QFY23) is likely to settle at the historical range of 2.2 % – 2.4%. We recommend BUY factoring a best-in-class ROA of more than 2.5%.”