While the underwriting might still be top tier, this bank has completely failed to deliver value to its customers. Just an example - I’m a privy league black customer and have my vehicle loan and a big part of the core stock portfolio with them. However, I cannot even view the loan or my portfolio from my bank website/app - its broken. The app has those sections but they don’t have any synergy between their core divisions imo. The contrast with a tech first bank like IDFC or even SBI is staggering.
They really need to re-invent themselves if they want to remain a part of the big 4 in the long run.
After doing some analysis, I feel that, PAT of Kotak Bank has reduced from 22K Crore to 18K Crore mainly due to reduction in “Other Income” and not only because of slippages and higher provisions.
It seems that, Kotak Bank had good amount of “Other Income” of about 41K Crore last year and Now it is about 34K crore, before taxes. This could be due to lower gains from Investments and Lower treasury gains. Last year market conditions were much better and It seems that, they might have gained due to some profits from investments. Due to subdued market activity this year, their income seems to have dropped in that area.
I am not an expert in Banking domain, but these could be additional reasons for Reduced PAT this year.
Off course, in general, they seem to have lost some momentum in terms of technology and innovation and let us see if they can improve in this area, going forward.
I believe that, things may change once NIM improves after few quarters, and Fee based income improves. We need to wait and watch.
Disclosure: Invested and Have booked partial profits during upswing to 2300 and 2200 in past few months but continue to hold the position. It is a stock which is not for every one as it has tested investor’s patience in past 3 years.
With a very moderate growth trajectory, BV (standalone) has risen about 13% over the last 10 Q, and the stock has traded at an average of ~3.5x its BV during this period.
If we project a similar trend on a conservative basis for the next 10Q(i.e., up to Q4FY28), the BV could reach around 900-910. Assuming the stock trades at ~3x BV, the share price could hover around 3000, implying ~44% upside and a CAGR of ~13–14%.
Does this look lucrative enough? Maybe for investors expecting limited drawdown, barring any black swan events?
That said, banks seem to have lost momentum lately. The key question is, what could reignite their growth from here?
Is it other income streams, innovation, or technology-driven efficiencies?
Might not be related to fundamentals, as per the news, there’s a possibility of passive ETF flows from Bank Nifty rebalancing, as the allocation to top 1,2 bank’s is limited to 35% and there is higher flows expected to Kotak.
But the implementation is going to happen over six months gradually.
There is also possible rate cut coming December, which again good for Banking sector.
Rate cut in the near term is pretty bad for the banking sector. NIMs contract for these deposit taking banks as opposed to the loan dependent NBFCs. Fundamentally it is good for growth and liquidity - so good medium term drivers for the Banking sector. Also the bank aims to grow at 1.5 times the nominal GDP growth so there is also a top level tailwind.
