ICICI Securities has increased its target price for Kotak Mahindra Bank to Rs 520, citing strong loan growth prospects and improved asset quality. Although the bank reported a second-quarter profit of Rs 42.1 billion—a 4% miss against market estimates—the core operating profit grew by 21%. Investors are focusing on the bank's deposit management strategy and future loan expansion targets.
ICICI Securities has revised its outlook on Kotak Mahindra Bank, raising its target price to Rs 520 from the previous Rs 480. This update follows the bank’s second-quarter performance for the 2027 fiscal year, which showed a Profit After Tax of Rs 42.1 billion, representing a 29% increase compared to the same quarter last year.
While the profit figure was slightly below market expectations—missing estimates by approximately 4%—the brokerage highlighted the bank's core operational health. The Pre-Provision Operating Profit, which measures a bank's ability to generate profit from its core operations before accounting for bad loans, grew by 21%. Furthermore, asset quality trends showed improvement, with both the rate of new bad loans, known as slippages, and overall credit costs trending downward.
Deposit Strategy and Margins
A key focus for the bank has been its liability management, specifically the growth of long-term deposits. The bank secured Rs 553 billion in Foreign Currency Non-Resident (FCNR) deposits, which accounted for roughly 10% of its first-quarter deposit base. This strategy is designed to improve the tenure and stability of funds, providing better visibility for long-term lending.
However, this shift in deposit structure contributed to some pressure on profitability margins. The Net Interest Margin, a key metric of profitability from lending, dipped by 23 basis points quarter-on-quarter to 4.31%. This decline was largely attributed to the costs associated with gathering these specific deposits and certain short-term calculation effects. Despite this, the bank’s retail product segments continued to show steady expansion, growing at a healthy rate of 4% to 5% each quarter.
Growth Outlook
Looking ahead, analysts project that the bank could maintain a loan compound annual growth rate of 22% between the 2026 and 2028 fiscal years. This growth expectation, combined with an anticipated return on assets of over 2%, forms the basis for the revised valuation. The bank is currently valued at approximately 2.2 times its estimated 2028 banking business.
For investors, the key monitorables will be the bank's ability to protect its profit margins while maintaining loan growth. Tracking the sustainability of the current deposit strategy and the impact of these changes on upcoming quarterly results will be important for assessing the bank's long-term performance.