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Kotak Mahindra Bank
L o w e r N I I i n s p i t e o f r o b u s t c r e d i t g r o w t h …
The banking and financing business again contributed 80% of profits at |
346 crore (| 252 crore & | 94 crore) in the total consolidated PAT of | 436
crore rising 33% YoY. Margins declined to 5% from a comparable 5.3%
sequentially mainly due to rising cost of funds. As we expect loan growth
momentum of 30% to continue, standalone NII and PAT are estimated to
grow at 25% and 22% CAGR over FY10-12E to | 3596 crore and | 1221
crore, respectively.
Adjusted NIMs decline to 5%, now sustainable….
Loan book growth remained strong at 39% YoY and 10.3% QoQ to |
32,339 crore. Deposits also grew a healthy 29% YoY and 6.1% QoQ to |
31,047 crore. However, cost of funds rose sharply leading to NIM
declining 5.3% to 5%. Also, there was a change in the NIM calculation as
processing fees earlier classified as interest income will henceforth be
classified under non interest income. This resulted in 25-30 bps
adjustments in NIMs. NII grew 17% YoY to | 567 crore as against
estimated | 627 crore, marginally due to other adjustment.
CASA declined to 27% from 30% sequentially on high current A/c
deposits of year-end run off from the books. We expect the bank to
maintain 5% NIM with NII growth of 25% CAGR over FY11-13E. We
expect 25% CAGR in advances against management guidance of 30%
growth.
Capital markets related profits decline….
Kotak Securities average daily turnover stood at | 3582 crore for Q1FY12
declining 10% YoY and 22% sequentially with market share declining to
under 2.7% from 3% in Q4FY11. It generated PAT of | 23 crore in
Q1FY12E providing 16% PAT margin against over 20% earlier. Insurance
continues to be profitable with | 46 crore due to lower premiums earned.
V a l u a t i o n
We have revised our PAT estimates leading to FY13E RoE declining to
~15% and NIM at 5%. We have valued the bank at 2.4x FY13E ABV and,
on an SOTP basis, revised the target price to | 436. Considering the
recent run-up in the stock due to inorganic growth story, which remains
uncertain, we have assigned a SELL rating to the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Kotak Mahindra Bank
L o w e r N I I i n s p i t e o f r o b u s t c r e d i t g r o w t h …
The banking and financing business again contributed 80% of profits at |
346 crore (| 252 crore & | 94 crore) in the total consolidated PAT of | 436
crore rising 33% YoY. Margins declined to 5% from a comparable 5.3%
sequentially mainly due to rising cost of funds. As we expect loan growth
momentum of 30% to continue, standalone NII and PAT are estimated to
grow at 25% and 22% CAGR over FY10-12E to | 3596 crore and | 1221
crore, respectively.
Adjusted NIMs decline to 5%, now sustainable….
Loan book growth remained strong at 39% YoY and 10.3% QoQ to |
32,339 crore. Deposits also grew a healthy 29% YoY and 6.1% QoQ to |
31,047 crore. However, cost of funds rose sharply leading to NIM
declining 5.3% to 5%. Also, there was a change in the NIM calculation as
processing fees earlier classified as interest income will henceforth be
classified under non interest income. This resulted in 25-30 bps
adjustments in NIMs. NII grew 17% YoY to | 567 crore as against
estimated | 627 crore, marginally due to other adjustment.
CASA declined to 27% from 30% sequentially on high current A/c
deposits of year-end run off from the books. We expect the bank to
maintain 5% NIM with NII growth of 25% CAGR over FY11-13E. We
expect 25% CAGR in advances against management guidance of 30%
growth.
Capital markets related profits decline….
Kotak Securities average daily turnover stood at | 3582 crore for Q1FY12
declining 10% YoY and 22% sequentially with market share declining to
under 2.7% from 3% in Q4FY11. It generated PAT of | 23 crore in
Q1FY12E providing 16% PAT margin against over 20% earlier. Insurance
continues to be profitable with | 46 crore due to lower premiums earned.
V a l u a t i o n
We have revised our PAT estimates leading to FY13E RoE declining to
~15% and NIM at 5%. We have valued the bank at 2.4x FY13E ABV and,
on an SOTP basis, revised the target price to | 436. Considering the
recent run-up in the stock due to inorganic growth story, which remains
uncertain, we have assigned a SELL rating to the stock.
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