Kotak Mahindra Bank and ICICI Bank will be the focus during this week’s trading session after their Q2 results. Both banks posted a strong net interest income, while their asset quality improved further during the quarter. LKP Securities has given ‘Buy’ recommendation on both the stocks in the banking sector due to stability in its balance sheet, healthy margins and strong interest income. The stock brokerage sees a potential gain of 21% in the two stocks.
This week, stock Market Will be closed on 24th and 26th October Diwali festival. While trading will resume on 25 October and further on 27 and 28 October.
Kotak Mahindra Bank,
During Q2FY23, the bank posted a net profit of 2,580.68 crore up by 27%, while net interest income grew by 26% 5,099 crore. The asset quality improved with Gross NPAs 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 increased to 5.17% in Q2FY23.
In a research note, Ajit Kumar Kabi of LKP Research said, “We are confident that the bank will further improve its profitability driven by high growth, healthy margins, strong non-interest income and low provisioning. We recommend Buy factoring. Has a best-in-class ROA of over 2%.”
On valuation, Kabi said, “We expect the loan book of KMB to grow at a CAGR of ~22% in FY22-24E. On CMP 1903, Stock 4.1(x) Standalone FY24E Available at . The Adjusted BVPS 463. 4.8xFY24E Valuation of Standalone Entity with BVPS and Valuation of Subsidiaries 84; we arrive at the target price of 2,304 (unchanged). We recommend a BUY rating with a potential growth of 21%.”
Close on Kotak Bank on BSE On Friday, 1902.90 each rose by 2.05%. The market cap of the bank is approx. 3.78 lakh crores.
So far in 2022, the shares have risen more than 4%. However, the shares have lost more than 11% in a year. Shares were close on October 21 last year 2,146 each.
ICICI Bank:
This lender posted 37% year-on-year growth in net profit 7,558 crore in Q2FY23, while Net Interest Income (NII) was 14,787 crore, an increase of 26% annually. The bank’s asset quality improved during the quarter, while both advances and deposits saw double-digit growth.
Further, the Gross NPA Ratio of the bank improved to 3.19% in Q2FY23, 3.41% in Q1FY23 and 4.82% in Q2FY22. Net NPA ratio improved to 0.61% in Q2FY23, as against 0.70% in Q1FY23 and 0.99% in Q2FY22.
In Q2, bank deposits grew 12% year-on-year 1,090,008 crores. was on total advance 938,563 crore, up 23% annually.
In a separate research report, Kabi said, “Considering stable balance sheet growth in FY23E and credit cost of 1%, we estimate the bank’s FY23E ROA and ROE at 1.8% and 15%, respectively.”
Kabi said, “We expect its loan book to grow at a CAGR of 20% in FY 2012-24E, led by technology initiatives. Credit cost normalization is underway. We expect ROA/ROE of 1.8% in FY13E and Rs. Estimating a return ratio of 15%. We value the standalone entity with 3xFY24E BVPS ( 320) and investments in subsidiaries and joint ventures ( 138 per share); we arrive at the target price of 1,097. We recommend a buy with a potential gain of 21%.”
ICICI Bank shares closed on BSE On Friday, 907.15 each rose 2.13 per cent. Bank’s market cap is over 6.32 lakh crore.
Year-on-year, ICICI Bank shares have gained nearly 19%. In a year, the upside is about 20% so far.
Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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