Please see the end of the report for disclaimer and disclosures.
KOTAK MAHINDRA BANK
June 04, 2008
A consistent performer: Maintain Buy
Kotak Mahindra Bank ended the year with encouraging numbers. We
maintain our Buy rating on the stock on account of the following reasons:
• Core business is getting stronger. The standalone banking profit
jumped c.86% yoy to Rs. 692.1 mn. CASA ratio increased about 500 bps
over the year, leading to a 40 bps rise in consolidated NIM to 5.6%, one
of the highest in the industry. Net NPA ratio fell 20 bps to 1.78%. Going
forward, we expect the Bank to maintain the momentum in CASA ratio
with the expected addition of 100 branches in FY09. Asset quality is also
expected to improve further as the Bank has indicated its inclination to
focus on quality lending, especially in the retail segment.
International business is showing robust growth. International
subsidiaries are reporting stronger numbers, both in absolute as well as
relative terms. Net profit increased c.124% yoy to Rs. 178 mn. The
contribution of these subsidiaries to consolidated profit increased
from 4.7% in Q4’07 to 7.4% in Q4’08.
• Non-banking businesses are showing encouraging prospects. We
have identified life insurance, investment banking, and alternate assets
management as the future growth areas. Life insurance is likely to get a
boost due to the Bancassurance channel being developed by the Bank.
The Investment Banking division has been involved in a number of key
IPOS and QIPs, such as Reliance Power, SBI, Future Capital etc.
Alternate assets grew by around 4.7 times in FY08 to Rs. 56 bn. We
expect impressive growth in FY09 as the Bank continues to raise funds.
Kotak Mahindra Bank
Key Figures (Standalone)
Q4'07 Q3'08 Q4'08 YoY % QoQ% FY07
FY08 YoY %
(Figures in Rs mn, except per share data)
Net Interest Income