IGI Logo

Result Highlights

* Asset quality: Gross slippages amounted to Rs 12.05bn (annualised slippage ratio of 1.5%) and recoveries and upgrades were healthy at Rs 6.92bn

* Margin picture: NIM deteriorated -18bps QoQ to 5.57% due to repricing of deposits

* Asset growth: Advances grew 2.7%/17.3% QoQ/YoY driven on sequential basis by healthy growth across various retail loan segments and Corporate Banking.

* Opex control: Total opex grew 8.9%/25.6% QoQ/YoY, staff cost grew 13.2%/40.4% QoQ/YoY and Other expense grew 6.1%/16.9% QoQ/YoY

* Fee income: Fee income de-grew/grew -5.2%/10.3% QoQ/YoY, where the sequential de-growth was driven by Distribution and syndication fees

Our view – KMB chooses middle path for deposit salvation

KMB re-activates ActivMoney deposit offering to accelerate liability accretion: The bank has re-activated the ActivMoney sweep deposit offering, wherein savings balances above a threshold are automatically moved to a liquid fixed deposit. Consequenly, sweep deposits have grown 24% sequentially and occupy 7-8% of total deposits. The average cost of ActivMoney deposit is 5-5.25%, which is a sweet spot given average cost of fixed- rate SA is 3.6% and average cost of term deposits is 7-7.3%. There has been some internal cannibalization of SA deposits due to this but, overall it is a positive strategy.

Slippages as well as credit costs have risen on a sequential basis in what management flags as normalization of asset quality outcomes: Gross NPA additions had amounted to Rs 8.23bn during 4QFY23. Management stated that credit cost has normalised upward to about 50 bps on annualised basis. Credit cost is also influenced by loan mix and the share of unsecured loans has moved up.

Expenses have grown rapidly on sequential basis due to non-structural staff expenses: The staff cost has increased by 13% QoQ and 40% YoY. Excluding the retiral cost, the employee cost would have grown 20% YoY. The attrition for junior level employees including probationers is about 50%, which is the number quoted in the media. The attrition rate for senior and mid-level employees is 10% and 20%, respectively.

We maintain ‘Add’ rating on KMB with a revised price target of Rs 2200: We value the standalone bank at 3.0x FY25 P/BV for an FY24E/25E/26E RoE profile of 13.4/14.1%/14.5%. We assign a value of Rs 585 per share to the subsidiaries, on SOTP.

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632

Above views are of the author and not of the website kindly read disclaimer