Neutral on Kotak Mahindra Bank - Motilal Oswal Q3 FY11

KOTAK MAHINDRA 3QFY11: In-line; Loan growth +35% YoY; Capital markets and Asset mgmt disappoint again; Neutral

Lending business consolidated profits grew 44% YoY and 8% QoQ to Rs2.8b (in-line). However, Kotak Bank standalone PAT declined 4% QoQ and 32% YoY.

Kotak (standalone) opex grew 18% QoQ and 43% YoY and C/I ratio increased to 57% from 52% a quarter ago.

Consolidated Reported NIM for the quarter stood at 5.4% vs 5.6% a quarter ago and 6.2% a year ago.

Consolidated loans are up 7% QoQ and 37% YoY to Rs400b led by strong growth in CV, Home and Agri loans. Corporate loans grew 5% QoQ and 30% YoY.

Consolidated GNPA (ex stress assets) in absolute terms down 6% QoQ. The bank's standalone PCR improved to 72% vs 70% a quarter ago.

We expect earnings CAGR (ex insurance) of 18% over FY10-13 and expect the bank to report EPS of Rs20 in FY11, Rs23 in FY12 and Rs28 in FY13. BV would be Rs150 in FY11, Rs174 in FY12 and Rs203 in FY13. Stock trades at 2.4x FY12E BV and 18x FY12E EPS (adjusted for value of insurance business). Maintain Neutral.

Source : Equity Bulls

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