Motilal Oswal Sees Potential in Kotak Mahindra Bank, Sets Target Price at Rs 470

Kotak Mahindra Bank Posts Strong Q4FY26 Earnings, Beats Estimates

Kotak Mahindra Bank (KMB) has reported a healthy standalone profit after tax (PAT) of INR40.3 billion for the fourth quarter of fiscal year 2026, marking a 14% beat and a 13.4% year-over-year increase. The bank's consolidated PAT stood at INR54.2 billion, up 6% year-over-year and 6% from the previous quarter.

The bank's net interest income (NII) grew 8.1% year-over-year to INR78.8 billion, in line with expectations. Net interest margins (NIMs) improved sharply by 13 basis points to 4.67% in the quarter, despite being adjusted for a day count impact that left NIMs largely flat at 4.54% compared to the previous quarter.

KMB's advances growth was steady at 16.2% year-over-year and 3.2% from the previous quarter, driven by broad-based growth in high-yielding loans (HL), bank borrowings (BB), small and medium enterprises (SME), and corporate advances. Credit card outstanding remained flat from the previous quarter. Deposits grew by 14.7% year-over-year and 5.5% from the previous quarter, while the current account (CA) book grew 18% from the previous quarter.

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The bank's cash reserve account (CASA) ratio improved by 200 basis points to 43.3%, while slippages declined sharply to INR10.2 billion, down 32% year-over-year and 37% from the previous quarter. Credit costs fell to 0.39%, lower than the bank's guidance. The gross non-performing assets (GNPA) ratio declined by 10 basis points to 1.2%, while the net non-performing assets (NNPA) ratio declined by 6 basis points to 0.25%.

KMB Sees No Inherent Risk from West Asia Conflict

The bank's management does not see any inherent risk from the ongoing West Asia conflict.

Earnings Estimates and Outlook

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Motilal Oswal's research team has marginally upgraded its earnings estimates for KMB by approximately 2% for fiscal years 2027 and 2028. The team expects the bank's return on assets (RoA) and return on equity (RoE) to be 1.96% and 12.1%, respectively, by fiscal year 2027. The research team reiterates a "buy" rating with a target price of INR470, which is equivalent to 2.1 times the bank's September 2027 estimated adjusted book value (ABV) plus a sum-of-the-parts (SOTP) of INR165.