Kotak Mahindra Bank stock jumps 2%, among top Nifty gainers after Q2 results; JPMorgan raises target price

Kotak Mahindra Bank stock rose 2.2 percent to Rs 440 in morning trade, outperforming the broader market. The stock has declined around 1 percent so far this year, compared with a 14.1 percent fall in the Nifty 50. The bank's market capitalisation stood at approximately Rs 4.37 lakh crore. The gains came amid weakness in benchmark indices. At 9:46 am, the Sensex was down 327 points at 72,797, while the Nifty declined 114 points, or 0.5 percent, to 22,486.

JPMorgan maintained its Overweight rating on Kotak Mahindra Bank and raised its target price to Rs 492 per share from Rs 468 earlier. The revised target implies an upside of over 14 percent from Friday’s closing price. The brokerage said the bank delivered a strong second quarter, beating expectations on key operating metrics. It expects higher interest rates to provide a tailwind to margins and earnings.

JPMorgan said that foreign currency non-resident (FCNR-B) deposits could weigh on net interest margins (NIM) in the near term. However, an improving current account and savings account (CASA) deposit mix and better liquidity deployment should support a recovery. The brokerage also highlighted benign asset quality trends and expects the impact of the transition to expected credit loss (ECL) provisioning to remain manageable.

Bernstein maintained its Market Perform rating on Kotak Mahindra Bank, with a target price of Rs 500 per share, implying more than 16 percent upside from previous close. The brokerage said earnings per share grew 29 percent year-on-year and 2 percent sequentially, supported by strong balance-sheet growth of 25 percent from a year earlier. However, Bernstein flagged that Kotak Mahindra Bank recorded the sharpest net interest margin compression among four large private sector banks, even as loan growth remained healthy, led primarily by corporate lending.

The brokerage noted that return on assets (RoA) declined 22 basis points sequentially, partly offsetting the benefits of strong business growth. Asset quality remained benign, Bernstein said. Kotak Mahindra Bank reported a 29.5 percent year-on-year increase in net profit to Rs 4,212 crore for the September quarter of FY27, compared with Rs 3,253.3 crore in the corresponding quarter last year. Net interest income rose 15.7 percent to Rs 8,459 crore from Rs 7,311 crore a year earlier, while operating profit increased 21.1 percent to Rs 6,382.2 crore.

Asset quality improved sequentially, with gross non-performing assets declining to 1.04 percent from 1.18 percent in the June quarter. Net NPAs fell to 0.24 percent from 0.27 percent. Provisions stood at Rs 803.6 crore, down 15.2 percent year-on-year, although they increased 20.3 percent sequentially from Rs 668 crore.