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Kotak Mahindra Bank
F3Q11: A Muted Quarter
What's Changed
Price Target Rs325 to Rs350
Kotak reported consolidated profit of Rs3.8 bn (+5%
QoQ and +16% YoY). The key trends were:
a) Stand-alone bank – profits were down 4% QoQ
and up 32% YoY. Loan growth was robust at 9%
QoQ and 35% YoY. However, margins compressed
by 30 bps QoQ to 5.3%. Credit costs dropped
sharply during the quarter to ~30 bps (annualized).
Profit progression was hampered by one-off
operating costs incurred during the quarter.
b) NBFC (Kotak Prime) – volume progression was
good at 4% QoQ /40% YoY. Profits were up sharply
(+53% QoQ / 90% YoY) aided by recovery of a
historical NPA recorded this quarter.
c) Securities business – earnings fell 10% QoQ and
21% YoY. Market share was stable at 3.7%.
d) Investment banking – profits were stable QoQ but
still remain well below peak levels in the last cycle.
e) Asset management divisions – Performance was
weak. The domestic mutual fund business recorded
a small profit of Rs56 mn (vs. a loss of Rs40 mn in
QE Sep-10 and Rs209 mn in QE Dec-09). Average
AUMs were stable QoQ but down 31% YoY.
f) Insurance business – registered a profit of Rs236
mn owing to cost control and other measures.
However, the outlook for growth remains uncertain
(NBP was down 44% YoY this quarter).
g) Capital position – very comfortable at the group
level, with a CAR of 19.5% (mostly Tier I).
Adjusting price target; maintain UW: We raised our
price target to reflect earnings estimate increases. We
also adopted a probability-weighted approach to
valuation. Our UW rating reflects valuation (trading at
16.5x F2012e earnings and 2.8x F2012e BV).
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Kotak Mahindra Bank
F3Q11: A Muted Quarter
What's Changed
Price Target Rs325 to Rs350
Kotak reported consolidated profit of Rs3.8 bn (+5%
QoQ and +16% YoY). The key trends were:
a) Stand-alone bank – profits were down 4% QoQ
and up 32% YoY. Loan growth was robust at 9%
QoQ and 35% YoY. However, margins compressed
by 30 bps QoQ to 5.3%. Credit costs dropped
sharply during the quarter to ~30 bps (annualized).
Profit progression was hampered by one-off
operating costs incurred during the quarter.
b) NBFC (Kotak Prime) – volume progression was
good at 4% QoQ /40% YoY. Profits were up sharply
(+53% QoQ / 90% YoY) aided by recovery of a
historical NPA recorded this quarter.
c) Securities business – earnings fell 10% QoQ and
21% YoY. Market share was stable at 3.7%.
d) Investment banking – profits were stable QoQ but
still remain well below peak levels in the last cycle.
e) Asset management divisions – Performance was
weak. The domestic mutual fund business recorded
a small profit of Rs56 mn (vs. a loss of Rs40 mn in
QE Sep-10 and Rs209 mn in QE Dec-09). Average
AUMs were stable QoQ but down 31% YoY.
f) Insurance business – registered a profit of Rs236
mn owing to cost control and other measures.
However, the outlook for growth remains uncertain
(NBP was down 44% YoY this quarter).
g) Capital position – very comfortable at the group
level, with a CAR of 19.5% (mostly Tier I).
Adjusting price target; maintain UW: We raised our
price target to reflect earnings estimate increases. We
also adopted a probability-weighted approach to
valuation. Our UW rating reflects valuation (trading at
16.5x F2012e earnings and 2.8x F2012e BV).
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