Kotak Mahindra Bank Q2 Review - Card Delinquencies Drive An Increase In Slippage Run-Rate: Motilal Oswal

Motilal Oswal Report

Kotak Mahindra Bank Ltd. posted a standalone profit after tax of ~Rs 33.4 billion (5% miss, 5% YoY growth). Consolidated PAT stood at Rs 50.4 billion (13% YoY growth) in Q2 FY25.

Net interest income grew 11.5% YoY to Rs 70.2 billion (inline). Net interest margin moderated 11bp QoQ to 4.91%. Other income grew 16% YoY to Rs 26.8 billion (11% miss). Total revenue thus grew 12.7% YoY.

Advances rose 14.7% YoY/2.5% QoQ to ~Rs 4 trillion while deposits grew 15.1% YoY/3.1% QoQ. Current account and savings account mix improved 20 bp QoQ to 43.6%.

Fresh slippages were elevated at Rs 18.7 billion (Rs 13.6 billion in Q1 FY25). Gross/net non-performing asset ratio rose 10 bp/8 bp QoQ to 1.49%/0.43%. Provision coverage ratio declined 344 bp QoQ to 71.4%.

Kotak Mahindra Bank entered into an agreement to acquire the personal loan book of Standard Chartered Bank (Rs 41 billion) to further fortify its position in the retail credit market. The acquisition is likely to be completed in the next three months, subject to regulatory/other approvals.

Kotak Mahindra Bank is navigating well through the limitations that regulator has imposed on the bank and potential lifting of the ban will further aid operating performance.

We fine-tune our earnings and estimate Kotak Mahindra Bank’s return on asset/return on equity at 2.2%/13.6% by FY26. Reiterate Neutral with a target price of Rs 1,950 (based on 2.2 times FY26E adjusted book value).

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