Kotak Mahindra Bank - Q4FY13 Result Update - Cholamandalam Securities

Strong performance from banking business; good outlook

- Consolidated PAT was at INR 6.7bn, up by 28% YoY, 15% QoQ
- Standalone Bank PAT grew 47% YoY and 21% QoQ to INR 3.6bn
- NIMs improved QoQ by 10 bps to 4.7%
- Loan growth was up 27% YoY and 6% QoQ led by growth across segments
- CASA grew by 300 bps QoQ to 29.0%

Robust Loan growth

Loan growth was robust with a growth of 25% YoY despite slowdown in CV/CE and auto loans. Higher growth was seen in agriculture, mortgages, auto, personal banking and business banking loans. Short term corporate loans were down 20% QoQ and up 18% YoY, adjusted for which loans grew 27% YoY and 6% QoQ. Growth remained strong across segments and was also supported by acquisition of Barclays Bank personal loans portfolio of ~ INR 6-7bn during the quarter.

Asset quality healthy

Asset Quality remains quite healthy with low NPAs. GNPAs for the consolidated entity stood at 1.1%, compared with 1.0% as on end 3QFY13. Excluding stressed assets acquired by Kotak Bank, GNPAs were benign with a 5% QoQ increase. Provision Coverage Ratio, as per RBI definition, improved to 68% Vs 66% in 3QFY13. Net restructured standard loans stood at just INR 107mn, 2bps of overall loans.

Healthy deposits growth, NIMs up 10 bps QoQ to 4.7%

Deposits growth was healthy at 32% YoY. The main drivers were 44% YoY growth in Savings Account balances and 38% YoY increase in term deposits. CASA increased 300 bps QoQ and its share came in at 29% Vs 26% in 3QFY13. Net Interest Margins were up 10bps QoQ to 470bps - remains amongst the highest in the sector. Fee Income growth was also healthy at +20% YoY led largely by transaction banking and third party product distribution. Management expects growth outlook for the economy to remain subdued for FY14, though it expects gradual revival during 2HFY14.

Valuation: Given the high NIMs, planned growth, return metrics, asset quality, rolling over to FY 15, we assign a target of 2.8X on consolidated Adj.P/BV for FY15E and arrive at a target price of INR 774. We retain our OUTPERFORMER recommendation.

Risks: High dependence on stressed assets, leverage to Capital Markets.

Source : Equity Bulls

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