Kotak Mahindra Bank Stock: 5 Reasons Goldman Sachs Thinks Kotak Could Be a $100 Billion Bank in the Next 4 Years

New Delhi: The private sector lender, which has underperformed Nifty Bank in the last two years, could grow up to 26 per cent in the next one year and also have a market capitalization of $100 billion in the next four years, said a foreign brokerage firm. Goldman Sachs said in a report.

“we believe

May join the ranks of banks with USD 100 billion in market cap by FY27E as all factors to deliver sustainable and strong volume and operating profit growth in this cycle as it puts its additional capital to work Goldman analysts Rahul Jain and Hardik Shah said in a research report.

He has upgraded the bank to buy rating and added the stock to his conviction list with a target price of Rs 2,135, which is likely to rise by around 26 per cent from the current prices.

“The main debate is the bank’s risk appetite and ability to deliver sustainable growth by using additional capital and sweating its infrastructure to drive ROE at a higher level. We believe KTKM is well positioned to infuse capital into this cycle, and for the successful execution of its retail asset strategy to take the m-cap to USD 100 billion by FY27E ,” said the analysts.

Goldman cites five reasons for its bullish outlook Kotak Bank:
1) Advantageous position in a rising interest rate environment with one of the highest CASA ratios and a mix of floating rate loan portfolios.

2) Given the stability of credit growth, the Bank has made significant investments to keep the resources in place to support the growth momentum, such as an increase of 57 per cent for employees as against 42 per cent from FY17 to FY21. growth.

And for 19 percent, while its digital platform is also being scaled up.

3) Strong asset quality during the COVID period with lesser credit loss as compared to peer banks.

4) Improvement in return ratio in the form of operating leverage leads to infusion of additional capital (800 bps more) into advances along with improving productivity.

5) Limited dilution risk as its promoter stake is already at RBI approved limit, leading to 180bps improvement in ROE in FY22-25E.

Earnings Outlook
Goldman analysts expect Kotak Bank to deliver +20 per cent CAGR for PAT. “We increase our earnings by 7/13/13 per cent for FY23/FY24/FY25E on the back of higher margins as the bank has to re-evaluate its floating rate book (66 per cent as on FY22, of which 48 per cent) There is benefit. linked to the repo rate) while on the liabilities side it has higher current account deposits (18 per cent as a percentage of liabilities) and a gain of 53 per cent of the total CASA mix,” it said.

(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. They do not represent the views of The Economic Times)