Indian stock market ended in the green on Friday, with the benchmark index NIFTY 50 breaching the 18,000 mark to end 84 basis points (bps) higher at 18,065. India VIX declined by 4.18 percent and closed at 10.94, this week the index gained 2.5 percent while India VIX decreased by 5.9 percent. For the second consecutive month, NIFTY ended on a positive (+3.99 percent) note. Bank NIFTY has increased by 0.54 percent on Friday and the index rose by 6.42 percent this month.

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Here is what the brokerages have to say on these bank stocks post their March quarter results -

Kotak Mahindra Bank

Kotak Mahindra Bank has reported a strong profit after tax beat (+32 percent) to Rs 3,500 crore/3 percent return on assets or RoA, up 26 percent year-on-year for the March quarter (Q4FY23), owing to continued margin uptick and lower opex and LLP as the bank continued to draw down contingent provisions (now at Rs 390 crore/0.12 percent of loans, being the lowest among large banks).

Credit growth moderated to 18 percent YoY/3 percent QoQ from the highs of 23 percent YoY/6 percent QoQ in 3Q, mainly due to a decline in the corporate book.

However, retail growth remained strong at 26 percent YoY/6 percent QoQ, led by unsecured loans and, thus, continued to see yield expansion (50bps QoQ)/margin expansion (+28bps QoQ to 5.75 percent). The bank expects NIM of more than 5 percent despite a rise in confirmation of funds (COF), which should support core profitability.

Brokerage Emkay Global has upgraded its earnings estimates for FY24/25E by 10-12 percent and introduced FY26E estimates. "We expect KMB's RoA/RoE to normalise to 2.1 percent/13 percent from the high of 2.4 percent/14 percent in FY23 due to the normalisation of margins/LLP," it stated.

The stock closed 1.48 percent higher at Rs 1,937.70 per share on Friday. "We have lowered our P/ABV multiple to 2.8 times FY25E ABV, factoring in the ensuing top management change, and retained our target price at Rs 2,000 (including revised subsidiary value at Rs 500).

RBL Bank

Private sector lender RBL Bank has delivered an in-line profit after tax at Rs 271 crore/1 percent return on assets or ROA, per guidance, on the back of continued margin uptick (up 27 basis points quarter-on-quarter to 5 percent) and contained LLP.

The bank's credit growth has improved to 17 percent year-on-year or 5 percent quarter-on-quarter, mainly led by healthy disbursements in the retail/SME book.

Going forward, the bank has guided for steady improvement in RoA (+10-20 bps pa)/RoE (100-150 bps) over FY24-26E, with a clear focus on building itself into a granular retail bank.

Shares of RBL Bank settled 1.04 percent higher at Rs 161 apiece on the NSE on Friday. The stock is currently trading at lower valuations of 0.7 times FY24E ABV/0.6 times FY25E ABV, largely ignoring the broader recovery and growth potential under the new management.

The brokerage retains a 'Buy' call on the stock with a target price of Rs 225 per share, based on 0.9 times FY25E ABV.

IDFC First Bank

Key catalyst in the near term is the reverse merger with IDFC First Bank and IDFC FHCL, subject to regulatory approvals, brokerage Sharekhan had said in its research note recently.

Assuming the swap ratio is expected to be favourable for IDFC Limited (holding company) to compensate minority shareholders for lower special dividend, which was otherwise used as additional equity capital infusion in IDFC First Bank (Rs 2,200 crore). This could be a catalyst for stock returns in the near term.

The brokerage believes that there could be an upside risk, driven by a favourable swap ratio announcement. "We have not factored in the potential upside in the valuation part due to uncertainty over the swap ratio. The stock is factoring in 11 percent holding company discount at the current price levels," it stated.

First Published:May 1, 2023 4:03 PM IST