Buy Kotak Mahindra Bank Limited For Target Rs. 450 by Geojit Investments Ltd
Focus on steady ROE expansion
Kotak Mahindra Bank, a private sector bank, has a network of 2,198 branches and 2,758 automated teller machines to serve customers across the country
• In Q4FY26, the bank’s interest income grew 6.3% YoY (1.8% QoQ) to Rs. 17,827cr on higher lending in the retail, small and medium enterprises (SME) and corporate segments. Interest expense rose 3.1% YoY (-0.1% QoQ) to Rs. 7,376cr.
• However, net interest margin (NIM) declined to 4.67% YoY from 4.97%, primarily because the cut in lending rates following the repo rate cut was offset by the slower repricing of deposits and continued growth in low-cost granular deposits.
• Pre-provision operating profit increased 2.3% YoY to Rs. 7,661cr due to a rise in total income (3.4%).
• Reported profit after tax grew 9.9% YoY to Rs. 5,423cr as provisions fell 48.7%.
• Kotak’s consolidated assets under management (AUM) grew 12% YoY to Rs. 7,47,613cr, driven by diversified assets expansion, mainly in domestic mutual funds (MF). Debt grew to Rs. 2,02,403cr from 1,65,372cr in Q4FY25.
Outlook & Valuation
The bank delivered a steady performance, driven by diversified customer engagement across retail, SME and institutional segments. Ongoing digital transformation initiatives and operational automation also helped. The management expects a gradual normalisation in margin as return ratios improve over the medium term, aided by enhanced fee income generation and incremental contributions from subsidiaries. The strategic emphasis remains on capital-efficient growth, portfolio diversification, risk management discipline and the rebranding of retail securities as Kotak Neo, reflecting a focus on scalable innovation and seamless customer experience. While external challenges including geopolitical tensions and commodity volatility persist, the bank's diversified franchise, robust risk management discipline, and strong operational execution support continued value creation prospects. Therefore, we have retained our BUY rating on the stock, with a revised target price to Rs. 450, based on 2.0x rolled-forward FY28E BVPS.
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SEBI Registration Number: INH200000345
