1 week Ago
Kotak Mahindra Bank share price extended gains for the fourth trading session on Friday after two prominent global brokerage houses upgraded their ratings on the banking stock. Kotak Mahindra Bank shares have rallied more than 6% in four sessions. Foreign brokerage firm Citi initiated a positive catalyst watch on Kotak Mahindra Bank shares expecting stability in loan growth and lower compression in net interest margin (NIM) in the third quarter of FY25.
Citi also upgraded Kotak Mahindra Bank stock to ‘Buy’ from ‘Neutral’, and raised the target price to ₹ 2,070 per share from ₹ 1,940 earlier. The brokerage firm expects Kotak Mahindra Bank’s loan growth to sustain momentum led by secured segments. With revamped focus on ActivMoney deposits and wider outreach, it estimates broadly similar deposits growth.
“We expect the extent of NIM moderation would be contained at 6-7bps QoQ. Deposit repricing, change in mix in favor of secured lending and slowdown in unsecured lending could be partially offset by KMB cutting SA rates in 2Q and acquisition of higher-yielding PL book from SC,” Citi said in a note. However, credit card and MFI stress will likely remain elevated in 3Q as well while PL may see some QoQ moderation.
Credit cost is estimated to be similar to 2Q, it added. “In our view, Kotak is a play on the overall financial-services market in India and is backed by a management team that has a track record of managing market and credit risk well and of being conservative in its approach. We expect it to sustain loan growth momentum in the current environment along with containing the delinquencies,” said Citi.
Moreover, lifting of regulatory restrictions will be a key incremental trigger for Kotak Mahindra Bank stock price. The Reserve Bank of India (RBI) had in April last year restricted the private lender from issuing fresh credit cards and onboarding new customers through online and mobile banking channels due to ‘serious shortcomings’ in its information technology (IT) infrastructure. Jefferies upgrades Kotak Bank Jefferies also upgraded its rating on Kotak Mahindra Bank stock to ‘Buy’ from ‘Hold’ as it believes that valuations or expectations are more aligned with realistic potential.
Kotak Mahindra Bank stock has been flat for the past 15 months and the brokerage firm believes valuations at 1.7x FY26 adjusted PB and 13x FY26 adjusted PE are reasonable and at fair discount to ICICI Bank. ‘We trim credit growth forecasts slightly that leads to a 2-4% cut to earnings forecasts for FY26-27.
Over FY25-27, we see loan Cagr of 15% and credit costs of 75-80 bps over FY26-27 driving 12% Cagr in earnings and ROE of 13% in FY26. Valuations at 13x FY26 adjusted PE and 1.7x adjusted PB are at a discount to larger peers now,” Jefferies said.
Jefferies also raised Kotak Mahindra Bank share price target to ₹ 2,120 apiece from ₹ 2,080 earlier. According to it, the triggers can be from stability in asset quality of unsecured loans and lifting of embargo on digital platforms. At 12:35 PM, Kotak Mahindra Bank shares were trading flat at ₹ 1,830.
40 apiece on the BSE . Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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