This week, stock markets will be closed on October 24 and 26 due to Diwali festival. While trading will resume on October 25, and further on October 27 and 28.
Kotak Mahindra Bank:
During Q2FY23, the bank registered a net profit of ₹2,580.68 crore up by 27% yoy, while net interest income advanced by 26% yoy to ₹5,099 crore. Asset quality improved with gross NPA at 2.08% during the said quarter from 2.24% in the June 2022 quarter and 3.19% in the September 2021 quarter. Net interest margin rose to 5.17% in Q2FY23.
In a research note, Ajit Kumar Kabi analyst at LKP Research said, "We believe the bank will further improve its profitability driven by higher growth, healthy margins, robust non-interest income, and lower provisioning. We recommend BUY factoring a best-in-class ROA of more than 2%."
On the valuation, Kabi added, "we expect KMB’s loan book to grow at CAGR of ~22% over FY22-24E. At CMP of ₹1903, the stock is available at 4.1(x) standalone FY24E Adjusted BVPS of ₹463. Valuing the standalone entity with 4.8xFY24E BVPS and subsidiaries valuation at ₹84; we arrive at a target price of ₹2,304 (unchanged). We recommend BUY rating with a potential upside of 21%."
On BSE, Kotak Bank closed at ₹1902.90 apiece up by 2.05% on Friday. The bank's market cap is nearly ₹3.78 lakh crore.
So far in 2022, the shares surged by over 4%. However, in a year, the shares have plunged by over 11%. On October 21 last year, the shares were near ₹2,146 apiece.
ICICI Bank:
This lender recorded a 37% yoy growth in net profit to ₹7,558 crore in Q2FY23, while net interest income (NII) stood at ₹14,787 crore increasing by 26% yoy. The bank's asset quality improved during the quarter, while both advances and deposits witnessed double-digit growth.
Further, the bank's Gross NPA ratio improved to 3.19% in Q2FY23 versus 3.41% in Q1FY23 and 4.82% in Q2FY22. The net NPA ratio bettered to 0.61% in Q2FY23 against 0.70% in Q1FY23 and 0.99% in Q2FY22.
In Q2, the bank's deposits jumped by 12% yoy to ₹1,090,008 crore. Total advances stood at ₹938,563 crore up by 23% yoy.
In a separate research report, Kabi said, "factoring stable balance sheet growth and credit cost of 1% in FY23E, we estimate the bank’s FY23E ROA and ROE of 1.8% and 15% respectively."
Kabi added, "We expect its loan book to grow at CAGR of 20% over FY22-24E, led by technology initiatives. The credit cost normalization is underway. We estimate return ratio ROA/ROE of 1.8% and 15% in FY23E. We value the standalone entity with 3xFY24E BVPS ( ₹320) and of investment in subsidiaries and JVs ( ₹138 per share); we arrive at a target price of ₹1,097. We recommend BUY with a potential upside of 21%."
On BSE, ICICI Bank shares closed at ₹907.15 apiece up by 2.13% on Friday. The bank's market cap is over ₹6.32 lakh crore.
Year-to-date, ICICI Bank shares have jumped by nearly 19%. In a year, the upside is around 20% as of now.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
