KOTAK MAHINDRA BANK LTD - Q2 FY18

Standalone

Kotak Mahindra Bank Ltd reported stable second quarter FY18 with Net Interest Income & PAT growing in double digits YOY.  Net Interest Income, difference between interest earned and expended was at Rs. 23130 Mn in the current quarter against Rs. 19950 Mn same period previous year rising 16% YOY.  Net Profit jumped 22% in Q2 FY18 and stood at Rs. 9943 Mn compared to Rs. 8133 Mn corresponding quarter previous year. Net Interest Margin declined 14 basis points YOY at 4.33% in the current September quarter. Asset quality seemed to be on a stable footing with Gross NPAs as a percentage of Gross Advances improving both yearly and sequentially by 2 & 11 basis points. Net NPAs as a percentage of Net advances jumped 6 basis points YOY at 1.26% in the current quarter against 1.20% same period previous year. On sequential basis rise was just 1 basis point. One basis point is 0.01%. Provisions & contingencies growth was 9% on yearly basis & 6% sequentially and was reported at Rs. 2165 Mn in September quarter FY18. Positive growth was witnessed in all business segments with Retail reporting 11% YOY growth, followed by 10% in treasury and 4% in corporate segment. CASA ratio stood at 48% improving 900 basis points YOY and 400 basis points on quarterly basis. CASA deposits increased from Rs. 550410 Mn in Q2 FY17 to Rs 792210 Mn in current September quarter, jump of 44% YOY. Other income or non interest revenue accounting 17% of the total income of the bank rose 15% YOY and stood at Rs. 9539 Mn in current Q2 FY18. Advances moved at a higher rate of 21% than deposits growing at a lower rate of at 17% YOY. Quarterly growth was also better for advances in the current quarter at 7% whereas deposits rose sequentially by just 1%. Kotak Mahindra Bank is part of Kotak Mahindra Group, leading financial services conglomerates with a Networth of Rs. 352060 Mn as on 30^th September 2017. The Bank with CAR of 19.40% and branch network of 1362 across the country is poised for higher growth as one of the major players in Indian banking industry. Thus we recommend BUY for the stock for medium and long term investment with a target price of Rs. 1250. 

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