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Kotak Mahindra Bank Q1FY23 result review – Growth trajectory continue to be healthy

ICICIdirect Research 25 Jul 2022 DISCLAIMER

What’s buzzing:

Kotak Mahindra Bank posted strong business growth and steady operational performance. Its advances grew 28.8% YoY driven by secured and unsecured retail segment. Pedalling growth along with diversified asset mix with focus on risk adjusted margin to aid earnings and keep asset quality steady.

Context:

NII growth at 19.2% YoY and 3.9% QoQ to Rs 4697 crore, led by 14 bps sequential expansion in NIMs and robust growth in advances. Other income was down 8% YoY and 31.9% QoQ to Rs 1243 crore, mainly due to treasury impact. Credit cost was significantly lower than estimates at Rs 23.6 crore, thus PAT reported a growth of 26.1% YoY. GNPA and NNPA declined 10 bps and 2 bps sequentially to 2.24% and 0.62%, respectively. Net slippage for the quarter were down by ~11% QoQ.

Our Perspective:

Kotak Mahindra Bank is expected to continue the credit growth pace ahead of industry. Bank’s portfolio has remained resilient in the past over various business cycles. Clear focus on retail segment and risk adjusted margins to aid earnings and keep asset quality largely steady going ahead. With improvement in growth trajectory, diversified asset mix (with higher share of floating loans), and contingent provision buffer, we expect profit growth at 12% CAGR in FY22-24. Thus, culminating into healthy return ratios at ~2% RoA & ~12-13% RoE. Gradual increase in contribution from subsidiaries is expected to add valuations ahead. Hence, maintain our positive stance.

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