The private sector banking sector in India has seen significant growth, with assets reaching approximately ₹55 trillion as of 2024. Major players include HDFC Bank and ICICI Bank, which together hold a substantial market share. The net NPA ratio for private banks improved from 4.53% in 2018 to 1.9% in 2024, reflecting enhanced asset quality.
With a market capitalization of Rs 3.62 lakh crore, the shares of Kotak Mahindra Bank Ltd were trading at Rs 1,823.80 per share, increasing around 2 percent as compared to the previous closing price of Rs 1,788.05 apiece.
Brokerage recommendation
Citi Research, one of the well-known brokerages globally, gave a ‘Buy’ call on the Bank stock with a target price of Rs 2,070 apiece, indicating a potential upside of 16 percent from Thursday’s intraday low price of Rs 1,799.00 per share.
Recommendation rationale
According to the brokerage, Kotak Bank’s loan growth trend would continue accelerating. The bank’s personal loan category will likely grow, aided by lower default rates, indicating better asset quality.
Furthermore, Credit cost expectations, which have already reached higher levels, remain a source of concern. Citi also notes a change in the bank’s medium-term growth forecast, emphasizing its low beta as a solid investment attribute. Additionally, the removal of regulatory constraints would be a significant catalyst for the bank’s future success, potentially unlocking more growth opportunities.
Moreover, Kotak Mahindra Bank initially announced the acquisition in October, agreeing to pay Rs 4,100 crore for Standard Chartered’s India personal loan portfolio. This move is part of Kotak’s aim to increase its position in the retail credit sector while also driving customer-centric growth. The purchase will allow the bank to expand its operations and enhance its focus on the wealthy salaried client category.
Financial performance
Examine the company’s financial condition, revenue jumped by 19 percent from Rs 13,717 crore in Q2FY24 to Rs 16,427 crore in Q2FY25, and during the same time frame, net profit jumped by 13 from Rs 4,461 crore to Rs 5,044 crore.
Margin Guidance
The company’s NIM fell by 11 bps to 4.91% due to a shift towards secured assets, impacting yields. Management is optimizing the loan mix and deposit rates to stabilize margins, with a savings account rate cut expected to boost NIM by around 4 bps.
Market Outlook:-
The commercial vehicle industry saw a 10% decline, but recovery is expected in H2 due to government spending and festive demand. Microfinance dropped 4%, though long-term prospects remain positive. The bank aims to drive granular deposit growth and strengthen customer-centric distribution strategies.
Company snapshot:-
Kotak Mahindra Bank is a diversified financial services group that offers a wide range of banking and financial services such as retail banking, treasury and corporate banking, investment banking, stock broking, vehicle financing, advisory services, asset management, life insurance, and general insurance.
Written by:- Abhishek Singh
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