Please refer to important disclosures at the end of this report
1
Kotak Mahindra Bank (KMB) is India’s leading full services financial
conglomerate, dominating the securities and investment banking space. Kota
k
Mahindra Bank, promoted by Uday Kotak, post receiving a licence in 2002, gre
w
to a loan book size of `118,665crore in FY16. Retail loans form ~50% of total
loans, enabling KMB to earn the best NIM in the industry at 4.5-4.9% led by high
yielding retail loans. With the ING Vysya Bank merger, the composition of the
loan portfolio has been altered with retail advances proportion declining to
~41% from 50%. CASA ratio improved from 28-29% in the past to ~37.4% in
merged bank. KMB has been trading at rich valuations consistently due to its
superior return ratios and NIM. For the merged entity, NIMs and RoA are
expected to remain at steadyin years to come and it seems that it may continue
to stay better than the peers. While asset quality is intact and likely to improve,
we will keenly monitor improvement in revenue traction, which we believe will be
critical for RoE improvement. Although RoE may dip in the near term following
merger (with ING Vysya) it is expected that synergy benefits to play out over the
long term. KMB expects loan growth to accelerate in 2HFY17E post-integrating
process IVB with itself. KMB will continue to focus on segments like CV, Business,
Small and Corporate banking. Credit quality of the combined entity has started
to stabilize, which is expected to gradually improve in next 6-8 quarters. The
Management has marginally increased credit cost estimate to ~50bps from
earlier ~40-45bps on combined book for FY17E. Hence Buy.
BUY
CMP `788
Stock Info
Sector
Beta 0.8
Bloomberg Code
Shareholding Pattern (%)
Promoters 33.7
MF / Banks / Indian Fls 9.8
FII / NRIs / OCBs 43.0
Indian Public / Others 13.5
Abs. (%) 3m 1yr 3yr
Sensex (6.6) 2.7 28.9
Kotak Mah. Bank 3.4 17.8 117.4
52 Week High / Low 836/587
Avg. Daily Volume 2,17,132
Banking
Market Cap (
`
cr) 1,45,115
5
BSE Sensex 26,305
Nifty 8,108
Face Value (
`
)
Reuters Code KTKM.BO
KMB@IN
Vaibhav Agrawal
022 – 3935 7800 Ext: 6808
Kotak Mahindra Bank
Others | Banking
November 16, 2016
Kotak Mahindra Bank | Banking
November 16, 2016
2
Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com
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Disclosure of Interest Statement Kotak Mahindra Bank
1. Financial interest of research analyst or Angel or his Associate or his relative No
2. Ownership of 1% or more of the stock by research analyst or Angel or associates or relatives No
3. Served as an officer, director or employee of the company covered under Research No
4. Broking relationship with company covered under Research No
Ratings (Based on expected returns Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)