Kotak Bank 'attractive' despite short-term issues, rises over 5%

economictimes.indiatimes.com:

Analysts at most top brokerages reduced or retained share price targets on Kotak Mahindra Bank after the company reported strong March quarter results. The stock jumped 5.02% to close at ₹1,624.4, emerging as the top gainer on the Sensex and Nifty on Monday.

Analysts said despite the short-term challenges, the bank's valuations are attractive compared to its peers given its sector-leading metrics on key parameters. Regulatory relief and top management stability will be key catalysts in the near term.

Kotak shares are down 14.9% so far this year as against a 1.4% gain in the Bank Nifty and 3.2% upside in the Nifty.

Nomura said the stock has significant value compared to peers, as it is trading at a discount to HDFC Bank and ICICI Bank in terms of both price to earnings (PE) and price to book (PB) ratios.

«With the recent sharp correction in the share price, it now also fits very well into our 'value'-focused framework as well,» said analysts at Nomura. «While the resolution of RBI's embargo and any further churn in top management will be key to watch, we find current valuations attractive for a high-quality franchise.»

They added that Kotak Bank is superior to its peers in terms of return on assets, funding cost, net interest margin, deposit growth and liquidity.

Analysts at UBS said the bank expects a potential impact of ₹300-450 crore on profit before tax due to the recent regulatory action.