Earnings Review: Should you buy, sell or hold Kotak Mahindra Bank post Q3 results?

Updated : January 27, 2021 03:03 PM IST

Kotak Mahindra Bank reported a 16.14 percent rise in standalone net profit at Rs 1,853.54 crore in the quarter ended December 2020.

While Goldman Sachs and Morgan Stanley were neutral, UBS and CLSA were bearish on the stock.

Kotak Mahindra Bank reported a 16.14 percent rise in standalone net profit at Rs 1,853.54 crore in the quarter ended December 2020 as compared to Rs 1,595.90 crore in the corresponding quarter of last year.

The rise in profit was supported by an increase in NII and operating profits.

The bank's Net Interest Income (NII) for Q3FY21 was rose to Rs 4,007 crore, from Rs 3,429.5 crore in Q3FY20, up 16.9 percent. Net Interest Margin (NIM) during the quarter was at 4.51 percent.

However, the company's provisions also rose capping some profit.

Pre-provisions operating profit (PPOP) in the December quarter was Rs 3,083.34 crore as against Rs 3,297.49 crore, QoQ and Rs 2,388.07 crore, YoY.

Brokerages remained mixed on the stock post the earnings. While Goldman Sachs and Morgan Stanley were neutral, UBS and CLSA were bearish on the stock.

Here's what the brokerages said:

Goldman Sachs

The brokerage remained neutral on the stock while raised the target price to Rs 1,986. The brokerage said that the company reported a beat with core PPoP growth of 34 percent YoY, driven by a better-than-expected margin with NII beating estimates. NII beat partially offset by slightly higher-than-expected provisions, it added.

Morgan Stanley

The brokerage had an equal-weight rating with a target at Rs 2,025. The Q3 missed estimates largely due to one-time interest income reversals, said MS. It expects asset quality to normalise hereon and focus on loan growth to sustain. The PPoP growth should remain strong, it noted.

UBS

The brokerage maintained a sell rating but raised the target to Rs 1,700. The management is confident on profitability but positives priced in, said the brokerage. It also reduced the lender's loan growth in FY21 to 3 percent from 5 percent and cut credit cost estimate to 1.4 percent from 1.5 percent earlier.

CLSA

CLSA maintained an underperform rating and cut its target to Rs 1,850 from Rs 2,000 earlier. It stated that the expectations remain high for the company. It trades at the upper end of its own trading history and at a 30 percent premium to HDFC Bank, observed CLSA.

The stock fell as much as 2 percent in intra-day deals to Rs 1755.20 per share on BSE.

Earnings Review: Should you buy, sell or hold Kotak Mahindra Bank post Q3 results?

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