Brokerages cut Kotak Bank’s earnings estimates as Q3 results disappoint

Brokerages have cut earnings estimates on Kotak Mahindra Bank after its December quarter numbers. The private sector lender reported a 24 per cent year-on-year rise in standalone net profit at Rs 1,596 compared to ETNow poll estimate of Rs 1,650 crore. The bank made provisions and contingencies of Rs 444 crore for the quarter compared with Rs 407.9 crore in the September quarter. Shares of Kotak Mahindra Bank slipped 2 per cent intraday but recovered losses to end up 0.5 per cent at Rs 1,625.95 on Tuesday.

Emkay Global believes that Kotak Mahindra Bank offers a safe harbour in the current risk-off environment given its superior risk adjusted return ratios and strong capital position. However, it has maintained hold rating due to regulatory overhang of promoter stake dilution and rich valuations, and also cut earnings estimates for FY20-22 period by 3-9 per cent.

IIFL has trimmed estimates by 3-4 per cent. “Given moderating growth outlook and asset quality pressure highlighted by the management, there could be further downside to multiples, which are still rich. While Kotak Mahindra Bank is a capital protection play, current multiples are too expensive in the face of a 15 per cent CAGR (compounded annual growth rate) in loans and a 15 per cent RoE outlook for the medium term,” said IIFL.


Nomura termed the bank’s third quarter performance as disappointing with weak loan growth and marginally higher credit costs. The brokerage has cut earnings forecasts by 6-9 per cent and said it prefers ICICI Bank and Axis Bank.