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Kotak Mahindra Bank reported Rs 4.32bn consolidated PAT, up 18% y/y
The standalone bank reported exceptionally strong PAT growth (34% y/y)
but the performances of the subsidiaries were mixed – the 4x y/y growth in
life insurance supporting the consolidated numbers.
Robust loan growth, NIM pressures. Loan growth continued to be
strong (35% consolidated) with the corporate book growing 30% q/q.
This derisking squeezed NIMs to 4.8% (5% in 1Q) - weak current
account balances also contributed. Management guided full-year loan
growth at ~30%, implying 6% growth in 2H – we think that’s modest,
even when seasonally adjusted.
Credit costs near-zero. Consolidated credit costs were ~20bp
(annualized), continuing the momentum of 1Q. The bank is seeing
recoveries of past bad loans, which is offsetting incremental delinquency
and the resumption of general provisioning. While these low levels may
not sustain, we see no significant credit quality shock, given Kotak's mix
of low-yield corporate and retail loans.
Insurance props up the subs. The subsidiary performance was weak.
Capital markets now contribute a mere 6% of PBT and the IB sub
actually reported losses. The life insurance company reported strong
profits (up 4x y/y) on the back of cost-cutting – profits tend to seasonally
rise in 2H given the lumpiness in 4Q revenues.
Maintain OW. Kotak is one of our top picks – we see the banking
business continuing to grow very strongly and the subsidiaries are
becoming less relevant as the quarters progress. Moderating NIMs are a
concern, but we think they’ll stabilize around the time credit costs
bottom out.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Kotak Mahindra Bank reported Rs 4.32bn consolidated PAT, up 18% y/y
The standalone bank reported exceptionally strong PAT growth (34% y/y)
but the performances of the subsidiaries were mixed – the 4x y/y growth in
life insurance supporting the consolidated numbers.
Robust loan growth, NIM pressures. Loan growth continued to be
strong (35% consolidated) with the corporate book growing 30% q/q.
This derisking squeezed NIMs to 4.8% (5% in 1Q) - weak current
account balances also contributed. Management guided full-year loan
growth at ~30%, implying 6% growth in 2H – we think that’s modest,
even when seasonally adjusted.
Credit costs near-zero. Consolidated credit costs were ~20bp
(annualized), continuing the momentum of 1Q. The bank is seeing
recoveries of past bad loans, which is offsetting incremental delinquency
and the resumption of general provisioning. While these low levels may
not sustain, we see no significant credit quality shock, given Kotak's mix
of low-yield corporate and retail loans.
Insurance props up the subs. The subsidiary performance was weak.
Capital markets now contribute a mere 6% of PBT and the IB sub
actually reported losses. The life insurance company reported strong
profits (up 4x y/y) on the back of cost-cutting – profits tend to seasonally
rise in 2H given the lumpiness in 4Q revenues.
Maintain OW. Kotak is one of our top picks – we see the banking
business continuing to grow very strongly and the subsidiaries are
becoming less relevant as the quarters progress. Moderating NIMs are a
concern, but we think they’ll stabilize around the time credit costs
bottom out.
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