Kotak Mahindra Bank’s aim to be 3rd largest private lender exposes it to significant M&A risk: Bernstein
Uday Kotak backed Kotak Mahindra Bank’s ambition to be India’s third largest private sector lender could expose it to significant M&A risk given the integration challenges and the weaker RoA of smaller banks, Bernstein Research a part of the Société Générale group has said.
The brokerage house also said that given the high growth outperformance ask, inorganic growth would almost be inevitable for Kotak Mahindra to achieve its ‘Top 3’ objective. To emerge as the third most profitable private sector bank, Kotak will need an organic earnings growth which is 7% percentage points higher than Axis which looks unlikely, it said.
In a recent interview with The Economic Times, Kotak Mahindra Bank CEO Ashok Vaswani had said that he aspires that the bank would become the third largest private sector bank by profits by 2030.
«3rd largest private sector bank by 2030 would require the bank to get ahead of Axis by growing its profit after tax faster by 7%, which we believe would be difficult to achieve organically,» said Pranav Gundlapalle, head, India financials at Bernstein.
"??The past outperformance has been 4-5% which has been driven by a widening return on asset (RoA) gap rather than growth outperformance."
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