The Economic Times daily newspaper is available online now.

    Kotak Bank shares jump 4% as Q4 beat makes investors overlook angry RBI to upgrade stock

    Synopsis

    Kotak Bank Share Price: Kotak reported 18.22% year-on-year (YoY) increase in its standalone profit for the quarter ended March 2024 to Rs 4,133.30 crore while its net interest income (NII) in Q4 rose 13% YoY to Rs 6,909 crore.

    Kotak Bank shares jump 4% as Q4 beat makes investors overlook angry RBI to upgrade stockAgencies
    Shares of Kotak Mahindra Bank today jumped up to 4.2% to day's high at Rs 1,612.30 on BSE after brokerages started upgrading the private lender on all-round beat in Q4 results despite negativity around recent senior management exits and an upset RBI.

    Nomura upgraded the stock to buy from neutral and gave a target price of Rs 2,040 saying that a high quality stock is now at a bargain.

    "Kotak's Q4 was strong on all fronts – PBT was 10% ahead of estimates (adjusting for one-offs), with the bank delivering sector-leading RoA (2.6% adjusted) and sector-leading deposit growth (+24% YoY). Importantly, management highlighted that resolving the bank’s IT issues is at the forefront of its agenda, and in the interim, the P&L impact from RBI’s embargo is expected to be limited to ~INR 3-4.5bn (i.e., ~2% of FY25E PBT)," Nomura said.

    JP Morgan upgraded the stock to overweight from neutral with a target price of Rs 2,070 on supportive valuations.

    "We believe KMB can continue to compound balance sheet at 16% CAGR over next 2 years and even factoring ROA normalization down (from F24 2.6%) we think bank earnings can compound at 16-17% CAGR over next 2 years with scope for upside driven by better opex control. Valuations at 10x F26E parent P/E are compelling for what is a high quality and growth compounding franchise," JP Morgan analysts said.

    Kotak reported 18.22% year-on-year (YoY) increase in its standalone profit for the quarter ended March 2024 to Rs 4,133.30 crore while its net interest income (NII) in Q4 rose 13% YoY to Rs 6,909 crore.

    Asset quality improved with GNPA/NNPA at 1.4/0.3% vs 1.7/0.3% QoQ. Slippages during the quarter stood at Rs 1,305 crore.

    However, not everyone is impressed so quickly. Jefferies has a hold rating on Kotak and has also reduced target price to Rs 1,790.

    Axis Securities has also cut the target price of Rs 1,755 from Rs 2,140 saying the uncertainties around the timeline of relaxation of restrictions by the regulator along with top-level management stability will weigh on the near-term performance of the stock.

    Motilal Oswal had a similar take as it said the absence of any near-term triggers and a watchful stance on execution, the lifting of the RBI restrictions, and management stability will limit the near-term performance.

    Kotak Bank shares have been underperforming for a while now and on the three-year scale the stock has lost over 9% of its value as against Sensex's 51% rise. The stock had touched a 52-week low of Rs 1,544.15 on Friday before buying resumed on the counter this morning.

    As far as the impact of RBI restriction on onboarding new customers through online and mobile banking channels and issuing fresh credit cards is concerned, the company's management expects the impact on business to be minimal. Assuming the restrictions stay for a year, Kotak expects an impact of Rs 300-450 crore considering higher tech spends and the financial impact of restrictions.

    (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)


    (You can now subscribe to our ETMarkets WhatsApp channel)

    (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2024 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more

    (You can now subscribe to our ETMarkets WhatsApp channel)

    (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2024 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
    The Economic Times

    Stories you might be interested in