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Kotak Mahindra Bank Q4: Upgrades from CLSA, Nomura, JPMorgan citing supportive valuations
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
JPMorgan has upgraded Kotak Mahindra Bank to “overweight” from its earlier rating of “Neutral” citing supportive valuations post the recent RBI action and senior management departure.
Multiple analysts who have coverage on Kotak Mahindra Bank have upgraded the Mumbai-based private lender, after it reported its March quarter results on Saturday. Analysts from CLSA, Nomura and JPMorgan have upgraded the stock, while Jefferies has cited risks from the RBI restrictions and potential attrition as the rationale behind cutting its price target on the stock.
Yet, 24 out of the 43 analysts who have coverage on the stock maintained their “buy” recommendation, while 12 of them have a “hold” rating. Seven analysts have a “sell” call on the lender.
Kotak Mahindra Bank reported the strongest deposit growth in 22 quarters for the January-March period, while the lender’s Net Interest Margin saw the highest expansion among other major private lenders.
Brokerage firm JPMorgan has upgraded Kotak Mahindra Bank to “overweight” from its earlier rating of “Neutral” citing supportive valuations post the recent RBI action and senior management departure. The brokerage has a price target of ₹2,070 on the stock.
JPMorgan said that the operating metrics in the March quarter for Kotak were strong with notable fee income growth.
The brokerage said that Kotak Mahindra Bank can continue to grow the balance sheet at a Compounded Annual Growth Rate (CAGR) of 16% over the next two years.
Analysts at Nomura have also upgraded the lender to “buy” from its earlier rating of “neutral.” It has a a price target of ₹2,000 on the stock. Although Nomura highlighted the elevated slippages during the quarter, it said that asset quality for the lender remains well in control.
The brokerage said that resolution of the Reserve Bank of India’s restrictions and any further churn in the top management will be the key to watch, the current valuations for the bank remain attractive.
CLSA has also upgraded Kotak Mahindra Bank to a “buy” from its earlier rating of “Accumulate” but has cut its price target to ₹1,920 from ₹2,100 earlier. CLSA has upgraded the stock despite what it called “near-term uncertainties.”
However, it does mention that a meaningful re-rating for the bank will happen only post the lifting of the RBI ban.
On the flip side, Jefferies has maintained its “hold” rating on Kotak Mahindra Bank but cut its price target to ₹1,790 from ₹1,970 earlier. The brokerage said that deposit growth was healthy but it expects loan growth to be slower as a rise in unsecured loans nomalise.
Resolution of the RBI restrictions and controlled management attrition is the key for the lender, according to Jefferies.
Shares of Kotak Mahindra Bank fell 4% last week after a 10% drop in the week before post the RBI restrictions.
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