Prabhudas Lilladher Issues ‘Buy’ on Kotak Mahindra Bank; Target Price Increased to ₹2,400

Kotak Mahindra Bank reported a mixed quarter as Pre-Provision Operating Profit (PPoP) missed the estimation of Prabhudas Lilladher by 4%, even after reporting better asset quality. While loan growth was weak at 13.5% against Prabhudas Lilladher estimates (PLe) of 15%, NII slipped by 3% due to QoQ increase in balance sheet liquidity by ₹377 bn leading to softer NIM at 4.5% for FY25 (PLe 4.67%). The brokerage is expecting a NIM decline of 10bps YoY in FY26E to 4.4%. The factors that can lead to improved financial performance are 1) utilization of excess liquidity (2) faster growth in PL/CC and (3) reduction in fixed SA rate from 3.8%.

Outlook

As per the brokerage, provisions are set to reduce from 73bps in FY25 to 63bps in FY26. It has increased the target price to ₹2400 from ₹2,230 by retaining the stock to ‘buy’.