Kotak Mahindra Bank Share Price Jumps 5% After Net Profit Rises 18%

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by Sandip Das on 6 May 2024,  3 min read

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Kotak Mahindra Bank‘s stock soared by more than 5 percent, ranking among the top gainers in the Nifty50 index on May 6, 2024, following the release of its fourth-quarter earnings report.

The private sector bank disclosed a net profit of Rs 4,133 crore for the period spanning January to March in the fiscal year 2023-24, marking an 18 percent increase compared to the Rs 3,496 crore recorded in the corresponding quarter of the previous year.

Furthermore, the bank’s net interest income rose to Rs 6,909 crore, reflecting a 13 percent year-on-year surge from Rs 6,103 crore in the previous year. The net interest margin (NIM) for the fourth quarter of fiscal year 2023-24 stood at 5.28 percent.

In terms of asset quality, Kotak Mahindra Bank reported a gross non-performing assets (GNPA) ratio of 1.39 percent, a decline from 1.78 percent in the previous year, while the net non-performing assets (NNPA) ratio decreased to 0.34 percent from 0.37 percent.

The bank’s loan book expanded by 20 percent year-on-year to reach Rs 3.91 lakh crore compared to Rs 3.25 lakh crore in the previous year. Average current deposits for the fourth quarter of fiscal year 2023-24 grew to Rs 60,160 crore from Rs 58,415 crore in the corresponding period of the previous year, while average savings deposits increased to Rs 1.23 lakh crore from Rs 1.17 lakh crore. Additionally, the bank’s term deposits grew to Rs 2.24 lakh crore for the fourth quarter of fiscal year 2023-24 compared to Rs 1.66 lakh crore.

For the full fiscal year 2023-24, Kotak Mahindra Bank’s profit surged to Rs 13,782 crore from Rs 10,939 crore in the previous fiscal year, representing a year-on-year increase of 26 percent.

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JP Morgan upgraded its rating on Kotak Mahindra Bank from neutral to overweight and raised the target price to Rs 2,070 per share, indicating a 34 percent increase from the previous close. This decision was influenced by supportive valuations post recent Reserve Bank of India (RBI) actions and changes in senior management.

JP Morgan expressed confidence that the impact of the RBI’s actions on the bank’s growth for the fiscal years 2025-26 would be minimal. In the fourth quarter, the bank exhibited robust core operating metrics, with adjusted headline profit surpassing JP Morgan’s estimates by 8 percent.

JP Morgan further stated, “We believe KMB can continue to compound its balance sheet at a 16 percent CAGR over the next two years. Even factoring in a normalization of return on assets (ROA) from the fiscal year 2024 level of 2.6 percent, we anticipate that the bank’s earnings can grow at a compounded annual growth rate (CAGR) of 16-17 percent over the next two years, with potential upside driven by improved operational expenditure control. Valuations at 10 times fiscal year 2026 estimated parent price-to-earnings (P/E) ratio are compelling for a high-quality, growth-compounding franchise.”

Source: moneycontrol

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