Kotak Mahindra Bank Q1 preview: Uday Kotak led lender's CASA, NIMs, earnings to remain strong; asset quality expected stable

Private lender Kotak Mahindra Bank share price dropped by nearly 3.50% in Monday’s trading session and even touched an intraday low of Rs 1,449.05 per piece. Investors were trading on a cautious to selling note, as Kotak Mahindra Bank is set to announce its June 2019 (Q1FY20) quarterly result. At around 1217 hours, Kotak Mahindra Bankstock was trading at Rs 1,458 per piece down by Rs 41.80 or 2.79% on Sensex. Unlike the other lenders, experts are very optimistic on Uday Kotak-led bank’s financial performance this quarter. Kotak Mahindra Bank is seen to report strong earnings with asset quality being stable. In previous quarter,  Kotak posted a net profit of Rs 1,408 crore up 25%, while PAT for FY19 stands at Rs 4,865 crore up 19% yearly basis. 

Kotak Mahindra Bank Q1FY20 preview:

Experts at Edelweiss Securities in their preview note said, “Growth momentum is likely to be above the industry average. Asset quality should be broadly stable, with inline provisioning. Performance of other subsidiaries will continue to be on expected lines.”

Meanwhile, ICICI Securities in their note said, “The business performance is expected to remain steady with a cautious approach on lending to certain segments. Healthy growth is seen in advances at ~21% YoY to Rs 2.14 lakh crore, led by traction in small business and select retail products. A cautious approach towards the auto & financial sector is expected to continue. A steady MCLR is expected to keep margins at 4.3-4.4%. Healthy business growth is expected to result in NII growth at 20.8% YoY to Rs 3120 crore while PPP is seen at Rs 2355 crore; up 16% YoY.”

With no substantial exposure to stressed corporates, ICICI Securities note said, “GNPA is seen staying stable at ~2% with provision seen at Rs 214 crore; ~10 bps of advances. The resultant earnings trajectory continues to remain healthy at 39% YoY to Rs 1428 crore.”

According to Phillip Capital, Kotak Mahindra Bank’s credit growth to remain strong aided by corporate and small business segments. Also, saving deposit should continue to see strong traction. NII growth is driven by credit growth and stable NIMs. While, stable asset quality to keep credit costs under check.

Further, Emkay’s note said, “We expect growth to be in line with Q4FY19; remain cautious on some segments. NIMs should remain healthy. Asset quality should follow the trend with no major deviations.”

In Prabhudas Lilladher’s view, most Kotak Mahindra Bank metrics, like business growth, CASA, NIMs and earnings will be strong, while also not see major hiccups in asset quality with credit cost close to 50-55bps. Bank has been lower in its key savings interest rate on <1lk balances and hence its impact of cost of funds will be important. Life insurance should do well, while capital market subs earnings will be slower.”