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Kotak Mahindra Bank Q1FY23 result review – Growth trajectory continue to be healthy
What’s buzzing:
Kotak Mahindra Bank posted strong business growth and steady operational performance. Its advances grew 28.8% YoY driven by secured and unsecured retail segment. Pedalling growth along with diversified asset mix with focus on risk adjusted margin to aid earnings and keep asset quality steady.
Context:
NII growth at 19.2% YoY and 3.9% QoQ to Rs 4697 crore, led by 14 bps sequential expansion in NIMs and robust growth in advances. Other income was down 8% YoY and 31.9% QoQ to Rs 1243 crore, mainly due to treasury impact. Credit cost was significantly lower than estimates at Rs 23.6 crore, thus PAT reported a growth of 26.1% YoY. GNPA and NNPA declined 10 bps and 2 bps sequentially to 2.24% and 0.62%, respectively. Net slippage for the quarter were down by ~11% QoQ.
Our Perspective:
Kotak Mahindra Bank is expected to continue the credit growth pace ahead of industry. Bank’s portfolio has remained resilient in the past over various business cycles. Clear focus on retail segment and risk adjusted margins to aid earnings and keep asset quality largely steady going ahead. With improvement in growth trajectory, diversified asset mix (with higher share of floating loans), and contingent provision buffer, we expect profit growth at 12% CAGR in FY22-24. Thus, culminating into healthy return ratios at ~2% RoA & ~12-13% RoE. Gradual increase in contribution from subsidiaries is expected to add valuations ahead. Hence, maintain our positive stance.
Disclaimer – I ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.
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