IGI Logo

Result and Price Analysis

Kotak Mahindra Bank (KMB) reported strong 1QFY24 results and the key pointers are: a) Strong NII (up 33% YoY and 2% QoQ) and seasonally higher provisions, b) GNPA/NNPA ratio stable at 1.77%/0.44%, c) restructured pool inched down to ?6.1bn (19bps of advances) v/s ?7.2bn in the previous quarter, d) credit off-take strong with growth of 17.3% YoY and 2.7% sequentially, e) covid provision held at ?3.4bn as of 4QFY23, provision write-back worth ?50mn, f) the total contingent provisioning (covid + Standard + Specific) stood 0.6% of net advances, h) Total PCR (including covid, general and specific provision) stood ~110% of GNPL amount, g) Headline NIM inched down 18bps QoQ to 5.57%. Moreover, stable Opex (C/I at 44.5%) led to superior ROA of ~2.8%. However, employee attrition is higher than peers and has a relatively weak liability franchise (v/s peers: HDFCB and ICICIB) that will be tested in FY24E as deposit competition is intensifying. Nevertheless, asset quality provides comfort for lower credit cost. Hence, the peak ROA (~3% in 4QFY23) likely to settle at the historical range of 2.2 % - 2.4%. We recommend BUY factoring a best in class ROA of more than 2.5%

NPA ratio stable; covid provision write-back continues:The 1QFY24 witnessed a steady asset quality performance as GNPA/NNPA/PCR/SMA2 stood at 1.77%/0.4%/78%/0.05% against 1.78%/0.37%/79%/0.09% in the previous quarter. The GNPA/NNPA ratio increased sequentially on the back of seasonally higher slippages (?12bn v/s ?8.2bn in 4QFY23) and flat reductions (?10.6bn v/s ?10.5bn in 4QFY23). The absolute GNPA (?59bn) increased sequentially by 2.4%. The SMA2 book stable at ?1.6bn (5bps of loans). The management reiterated about the books’ quality and see no visible area of stress. The total restructuring amount (covid + MSME) moderated to ?6.1bn (0.29%) against ?7.2bn (0.22%) in 4QFY23 out of which covid related restructuring is ~?2.3bn and rest is MSME restructuring. The provisioning expenses stood at 3.6bn increased against the previous quarter. Nevertheless, the bank has utilized covid provision worth ?50mn in this quarter. Covid provision continued to be held at ?3.8bn and total provisions (excluding PCR) stood 0.6% of net loans

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at www.lkpsec.com/#foo

SEBI Registration number is INM000002483

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