Kotak Mahindra Bank shares fell over 4% to Rs 1,793.85 on NSE after the private sector lender after its net interest margin (NIM) moderated 11 bps sequentially to 4.91% and card delinquencies drove an increase in slippage run-rate."Factoring in slower growth and rising NPAs, we cut our earnings by 1-5% over FY25-27E, while we retain our REDUCE rating with TP of Rs1,700 rolling forward on 1.7x Sep-26E Standalone ABV and subs/inv value at Rs550/share," Emkay Global analyst Anand Dama said.Similarly, Nuvama has also reduced EPS by 9% for FY25E/26E andreduced target price to Rs 1,615."Kotak reported a slight miss on earnings due to lower other income and 11bp sequential contraction in margin. Asset quality ratios deteriorated slightly, affected by higher slippages in unsecured and credit card segments. However, the bank expects recoveries from rural and secured businesses to mitigate the overall impact. Changes in the asset mix more towards secured products have affected the yields and margins, but the management continues to guide for mid-teen growth in unsecured lending," Motilal said.Also read | Kotak Mahindra Bank Q2 Results: PAT rises 5% YoY to Rs 3,344 cr; NII jumps 11%Stating that the bank is navigating well through RBI limitations, it said potential lifting of the ban will further aid operating performance. Motilal has a neutral rating on the stock with a target price of Rs 1,950.As of September-end, Kotak’s GNPA rose to 1.49% from 1.72% YoY and net NPA also rose to 0.43% from 0.37% YoY. Its total deposits grew 16% to Rs 446,110 crore while CASA ratio improved sequentially to 43.6% in Q2 vs 43.4% in Q1. Advances were up 17% YoY to Rs 419,108 crore.To protect its NIM – the bank has recently cut the savings account rate by 50bps and acquired the high-yielding personal book (Rs 4,100 crore) from Standard Chartered Bank. "However, given higher share of book linked to repo rate (60%), we believe the bank could be exposed to higher margin risk once the rate-cut cycle begins," Emkay said.Among global brokerages, JP Morgan has a target price of Rs 2,030 and Jefferies Rs 2,080.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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