Following Kotak Mahindra Bank’s strong Q4 numbers, analysts reset stock target up to ₹1,900; Worried about reputation impact than financial, says CEO

• Kotak Mahindra Bank’s share price surged by 5% on Monday, a day after the company’s Q4 results.
• The private sector lender reported an 18.22% year-on-year increase in its standalone profit.
• The RBI restrictions will not have any material impact on the existing businesses, says the CEO.

Kotak Mahindra Bank’s share prices surged by over 5% on Monday, a day after the leading private sector lender announced its Q4 results. The company reported an 18.22% year-on-year increase in its standalone profit and a 13% increase in net interest income (NII).

The shares of Kotak Mahindra Bank rallied 5.34% to rise to ₹1,629.30 from its previous close of ₹1,547.25. The share opened at a price of ₹1,600 and reached a high of ₹1,633 during the day.

Kotak Mahindra Bank Q4 results

Kotak Mahindra Bank reported a standalone profit of ₹4,133.30 crore and a net interest income of ₹6,909 crore.

The lender’s net interest margin during Q4 increased to 5.28%, up from 5.22% in Q3. The company’s advances increased 20% year-on-year to reach ₹3.92 lakh crore at the end of March 2024.

Kotak Mahindra Bank announced a dividend of ₹2 per share.

Good news amid recent regulatory action

The increase in share price due to the Q4 earnings comes as good news for investors who were hit by the sharp decline in the company’s share price due to recent regulatory action against the company by the Reserve Bank of India (RBI).

Last month, The RBI banned Kotak Mahindra Bank from onboarding new customers and issuing new credit cards through its online and mobile banking channels. The move is expected to affect the bank’s operations under Kotak 811, which is co-headed by founder Uday Kotak’s son Jay Kotak.

RBI’s ban was due to the deficiencies in the bank’s IT risk management. This resulted in the bank’s share price declining by over 12% on April 25.

Analysts set a target price of up to ₹1,900

After its Q4 earnings, analysts have given a “Buy” recommendation for Kotak Mahindra Bank and have set its target price to up to ₹1,900.

Yes Bank Securities has said that it has upgraded the bank to “Buy” for the first time and has revised the target price to ₹1,900. As per the financial advisor, the RBI order won’t dramatically impact the profitability.

“Margin has expanded on a sequential basis in a sign that the bank is managing overall spread outcomes well,” said Yes Bank Securities.

Axis Securities has also given a “Buy” recommendation for Kotak Mahindra Bank and has set a target price of ₹1,755.

Winning back the trust is the priority, says Ashok Vaswani

In the first media interaction as the managing director and the chief executive officer, Ashok Vaswani said that his priority is to get back to business as usual and get ready to come back roaring. During the earnings call, he said that the central bank’s regulatory actions will likely impact its profit before tax by ₹300 to ₹450 crore in FY25.

According to a report in the Economic Times, he said, "What is evident is that our efforts have fallen short of what the regulator expects. My commitment is to further accelerate our efforts and investments. Winning back the trust and reputation with our customers and regulators is the number one priority for me and management.”

Ashok Vaswani took charge of the company as MD and CEO on January 1 this year. And a strong performance in the first quarter under his leadership is bound to boost confidence among investors.

“The restrictions will not have any material impact on the existing businesses. But it will have an impact on the reputation and the franchise. I am more worried about the reputation impact than the financial impact,” he said when asked about the impact of the RBI’s action.

Overall, the impact of RBI’s crackdown may not be as severe for Kotak Mahindra Bank as it was for Paytm Payments Bank. However, it remains to be seen how soon the bank can regain consumer and investor’s trust in its operations.

Disclaimer: The content on this website is for informational purposes only and should not be construed as investment advice. We recommend readers consult certified, qualified and registered advisors for professional and personalised financial advice.

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