Earnings Update - Kotak Mahindra Bank (KMB IN) - Controlled cost and increasing CASA pushes earnings higher - CSEC Research

- Kotak Bank's advances grew moderately by (12.1% YoY, 2.6% QoQ) at INR 1.29tn. Growth in loan book was led by growth in CV/CE (40% YoY, 5% QoQ), Corporate Banking (24% YoY, 10% QoQ), Home loans & LAP (12%YoY, 3%QoQ).

- The loan book mix was noted at; Corporate Banking - 32.9%, Commercial Vehicle/Commercial Equipment - 7.5%, Agriculture - 12.8%, Business Banking - 12.9%, Home Loans and LAP - 19.4%, SME, PL & Credit card - 12.2%, Others - 2.4%. Consequently the broader mix constituted of Retail advances at 39.9% and Corporate advances at 60.1%.

- Deposits registered a growth of (14.1%YoY) to INR 1.49tn led by growth in SA of (45.1% YoY). CASA deposits grew robustly by 36% YoY due to the impact of demonetization. The CASA ratio stands increased to 42% vs. 39% in 2QFY17.

Valuation: KMB has shown stable and sustainable business growth. Its healthy asset quality and margin expansion paints a positive outlook for the bank. We assign a 3.2x P/BV on FY19E consensus estimate and arrive at a target price of INR 875. We rate the stock an OUTPERFORMER.

Risks: Deterioration in asset quality from the acquired books of IVBL.

Shares of KOTAK MAHINDRA BANK LTD. was last trading in BSE at Rs.785.35 as compared to the previous close of Rs. 794.65. The total number of shares traded during the day was 191940 in over 4649 trades.

The stock hit an intraday high of Rs. 802.5 and intraday low of 780.75. The net turnover during the day was Rs. 151606086.

Source : Equity Bulls

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