Page 1

Kotak Mahindra Bank Ltd.

RESULT UPDATE 25th October, 2018

 India Equity Institutional Research II Result Update – Q2FY19 II 25th October, 2018 Page 2

Kotak Mahindra Bank Ltd Quality growth with undeterred focus on risk
CMP Target Potential Upside Market Cap (INR Mn) Recommendation Sector
INR 1182 INR 1461 24% 2,245,253 BUY BFSI

Result highlights
Advances at INR 1849.4 bn grew at 21% yoy led by 28% growth in the retail book and 17% growth in the corporate book. The bank continued
to deliver strong growth in CV and small business/PL/credit card book of 40% and 39% respectively. NII at INR 26.9 bn grew 16% yoy/ 4% qoq.
NIMs (reported) at 4.2% contracted 10 bps qoq on account of pressure from cost of funds which increased ~16 bps qoq (vs. 12 bps qoq
increase in funds yield).
Fee income at INR 10.2 bn continued to exhibit strong growth, up 26% yoy. The bank delivered a PPOP of INR 21 bn, +21% yoy/3% qoq while
simultaneously improving opex/assets ratio (at 2.57% vs 2.66% in Q2FY18 and 2.56% in Q1FY19). Provisioning at INR 3.5 bn includes provision
on investments of INR 1.3 bn and was up 63% yoy/down 25% qoq. Credit costs of 51 bps is lower sequentially owing to low MTM losses as
compared to Q1FY19. PAT at INR 11.4 bn was up 15% yoy/ 11% qoq, translating into ROE of 11.6%. GNPA at INR 40.3 bn was up 3.4% qoq
translating into stress of 2.15%, down 2 bps qoq. NNPA was 0.86%, flat qoq and PCR stands at 62.8% (+196 bps qoq). CAR stands at 18%. The
bank continued to deliver strong growth while improving profitability and ensuring stress reduction for the 6th consecutive quarter.

MARKET DATA KEY FINANCIALS

Shares outs (Mn) 1907 Particulars (INR Mn) FY15 FY16 FY17 FY18E FY19E FY20E
EquityCap (INR Mn) 9536 NII 97.2 163.8 177.0 197.5 255.5 320.8
Mkt Cap (INR Mn) 2245253 PPOP 30.0 40.4 59.8 71.6 96.3 120.5
52 Wk H/L (INR) 1424/983
PAT 18.7 20.9 34.1 40.8 54.6 68.4
Volume Avg (3m K) 2981
Face Value (INR) EPS (₹) 24.2 11.4 18.5 21.4 28.6 35.9
5
Bloomberg Code KMB IN BVPS (₹) 183.1 130.6 150.0 196.7 224.2 258.6
Source: Company, KRChoksey Research
SHARE PRICE PERFORMANCE
Delivering growth while maintaining stringent risk framework
300 The bank delivered a loan growth of 18% yoy at INR 2221.7 bn on a consolidated basis vs. a
growth of 21% yoy at INR 1849.4 bn on a standalone basis mainly due to low growth in car
finance segment owing to intense competition. On a standalone basis, retail book continued to
200 grow at higher rate of 28% vs 17% growth in the Corporate book. Retail book stands at INR 781.7
bn vs INR 1067.7 bn of Corporate book. The mix of retail and corporate book stands at 42:58 vs
41:59 as on Q1FY19. The bank has guided for an advances growth of >20%.
100 CV/CE segment book at INR 170.5 bn continued to grow strongly at 40% yoy/6% qoq. Business
banking at INR 185.8 bn registered yet another quarter of muted growth at 3% yoy/3% qoq as
management stays cautious on this segment and would like to wait out another quarter
0 because taking a call on growing the portfolio. Home loans/LAP at INR 360.6 bn grew 23%
yoy/6% qoq while small business/PL/CC continued to grow at a higher rate of 39% yoy/11% qoq.
Mar-16

Jan-17

Apr-18
Oct-15

Aug-16

Jun-17

Nov-17

Sep-18

Recent foray into consumer durables and two-wheeler financing re-iterate the bank’s strong
focus on retail. The bank is also open to acquiring portfolios (of NBFCs) amidst the current
Kotak Mahindra Bank Ltd Sensex liquidity crisis should it meet the bank’s risk metrics.

MARKET INFO The bank has reduced its exposure to NBFCs by 50 bps yoy to 5.2% in Q2FY19 and to CRE from by
60 bps yoy to 3.1% in Q2FY19. The bank is expected to stay cautious in both these segments for
SENSEX 34034 some time until stabilization returns.

NIFTY 10225 Overall the bank feels it is well protected from any adverse macro condition given its focus on
risk management. For FY19-20, we are factoring in advances CAGR of 25% on standalone basis.

SHARE HOLDING PATTERN (%)

Particulars Sep 18 Jun 18 Mar 18

Promoters 30.02 30.03 30.04
FIIs
DIIs
39.44
8.78
39.93
8.77
39.56
8.98
25% 26%
Others 21.75 21.27 21.43
Total 100 100 100 Advances CAGR FY19-20E NII CAGR FY19-20E

ANALYST KRChoksey Research +91-22-6696 5555 / +91-22-6691 9576

Raghav Garg, raghav.garg@krchoksey.com, +91-22-6696 5584 is also available on Bloomberg KRCS<GO> www.krchoksey.com
Anushka Chhajed, anushka.chhajed@krchoksey.com, +91-22-6696 5620 Thomson Reuters, Factset and Capital IQ
India Equity Institutional Research II Result Update – Q2FY19 II 25th October, 2018 Page 3

Kotak Mahindra Bank Ltd

Digitization story continues
Digital remains a key focus area for the Group. Besides the bank, all other subsidiaries continue to benefit in terms of faster
processing, low costs and wide outreach of business with the use technology. The success story continues in terms of customer
acquisition through 811 and the bank has achieved its target of adding 16 million customers through 811 in 18 months. During
Q2FY19, the share of recurring deposits sourced digitally was 90% and that of term deposits was 69%. Kotak Securities mobile
transaction cash ADVs grew 91% YoY in Q2FY19. 89% of the individual policies written by Kotak Life Insurance were sourced
through Genie - tablet based end to end sales solution. Further, 96% of the Banca channel sales in Q2FY19 were through Genie. In
the case of Kotak General Insurance, its digital business in terms of volume grew 77% YoY.
Continue to maintain strong CASA
The bank continues to maintain strong CASA at 50.2% vs 50.3% in Q1FY19 and 47.8% in Q2FY18. The growth in total deposits of 24%
yoy/8% qoq was dominated by growth in CASA deposits which grew at 31% yoy/8% qoq followed by 18% yoy/9% qoq growth in Term
deposits. In CASA, SA grew at a higher rate of 36% yoy/9% qoq vs CA which grew at 19.7% yoy/7.1% qoq. Total deposits, CASA and
term deposits stood at INR 2058.3 bn, INR 1034 bn and INR 1024.3 bn respectively. The bank has been continuously making efforts
to increase the share of retail deposits vis-à-vis wholesale deposits and as the shift happens, the bank expects to have more sticky
and low-cost CASA to fuel its growth.
GNPA down for the 6th consecutive quarter
The bank reported improved asset quality with GNPA at 2.15% down by 2 bps qoq and NNPA at 0.86%, flat qoq. Also, the bank
increased its NPA coverage to 62.8%, up 196 bps qoq. In absolute terms, GNPA stood at INR 40.34 bn and NNPA at INR 15 bn.
SMA2 was at INR 1.65 bn which is 0.09% of net advances vs 0.11% in Q1FY19. The bank’s provisioning expense normalized in the
current quarter at INR 3.54 bn vs INR 4.69 bn in the last quarter owing to nil MTM losses in the current quarter but was up 63% yoy
due to improvement in the NPA coverage ratio. Credit costs came at 51 bps vs 76 bps in Q1FY19 and 38 bps in Q2FY18. the bank
continues to enjoy one of the best asset quality in the banking industry with possibly the lowest SMA2 book.
Over FY19-20E, given the bank’s prudent underwriting, we expect asset quality to improve further.
Other key concall takeaways
• The other operating expenses were a little higher in the current quarter mainly due to high marketing and advertising expense
of 811. It was an upfront cost which the bank believes will not occur again and going ahead, 811 will help reduce costs in a big way.
• The bank’s focus remains to manage risk rather than run after yields or growth. The bank is ready to work with low yields if the
risk-return justifies.
• The bank feels the increasing oil prices and global macro factors might affect the markets and sentiments in the short run.
• With PSBs facing asset quality stress and restricting growth, some of the heavy lifting in the recent past had been done by
NBFCs resulting in much higher growth for the sector compared to the banking sector. At the same time, in a low rate
environment, wholesale funding became cheaper, especially short term debt which ultimately led to severe ALM mismatch
amongst NBFCs that we are witnessing today.
• The bank reiterate that it would continue to avoid concentration – company wise as well as in terms of sector exposure.
• The bank is beginning to see opportunity in terms of better pricing and also in terms of being able to cherry pick exposures
(which in line with the bank’s risk and quality parameters). The bank expects pricing to improve from hereon. Though, the bank
has held back growth in car loans and capital markets exposure which it might accelerate in case better pricing returns.
– Low volumes on the car loans business has been a conscious decision due to worsening of margins which are not
in line with the bank’s risk—return.
• On the liabilities front, the bank would be targeting CASA along with retail term deposits. Incremental liabilities base would be
retail oriented.
• The bank continues to see good growth momentum in small businesses which are also showing a favorable trend in terms of risk
– seeing better delinquency rates.
• On real estate exposure/financing from an industry perspective:
• Anything above mass residential is facing pressure. Upto mass residential is doing fine/holding up.
• Commercial RE isnt so much under pressure.
• Land financing and very high end residential are facing severe pressure as a lot of there are pre-RERA projects which
have become unviable.

ANALYST KRChoksey Research +91-22-6696 5555 / +91-22-6691 9576

Raghav Garg, raghav.garg@krchoksey.com, +91-22-6696 5584 is also available on Bloomberg KRCS<GO> www.krchoksey.com
Anushka Chhajed, anushka.chhajed@krchoksey.com, +91-22-6696 5620 Thomson Reuters, Factset and Capital IQ
India Equity Institutional Research II Result Update – Q2FY19 II 25th October, 2018 Page 4

Kotak Mahindra Bank Ltd

Subsidiaries continue to deliver
Kotak Mahindra Life Insurance:
New business premium at INR 8.24 bn delivered a healthy growth by 28% yoy accompanied by growth of 31% yoy in total premium
which came at INR 17.2 bn. The company has ULIP share at 25%. Its claim settlement ratio is 99.3% for FY18 and persistency ratio
YTD June,2018 is 84.6%
Kotak Securities: The company delivered stellar performance in terms of total market share which increased from 1.9% in Q2FY18
to 2.5% in Q2FY19 due to increase in the Options market share and continues to maintain its leadership position in cash market
with a market share of 8.7%. Total income for the quarter grew 11% yoy while PAT at INR 1.12 bn was down 5% yoy due to high opex
incurred in attaining high market share in the options market.
Kotak Prime (car financing): The company recorded growth of 4.6% in car loans but registered negative growth in other loans of
8.6% resulting in overall flat growth in the loan book at INR 285.4 bn. NII declined by 3.6% yoy and PAT was up 4.6% yoy. The NBFC
has net NPAs at 0.40%.
Kotak AMC: The AMC recorded average AUM of INR 1355.08 bn, up 22.3% yoy. The company’s equity AUM market share rose to
3.96% vs 3.6% in Q2FY18. The PMS book grew 1.28x yoy.

ANALYST KRChoksey Research +91-22-6696 5555 / +91-22-6691 9576

Raghav Garg, raghav.garg@krchoksey.com, +91-22-6696 5584 is also available on Bloomberg KRCS<GO> www.krchoksey.com
Anushka Chhajed, anushka.chhajed@krchoksey.com, +91-22-6696 5620 Thomson Reuters, Factset and Capital IQ
India Equity Institutional Research II Result Update – Q2FY19 II 25th October, 2018 Page 5

Kotak Mahindra Bank Ltd

Income Statement (INR Mn) Q2FY19 Q2FY18 Q1FY19 Y-o-Y Q-o-Q

Interest income 58,109 47,601 54,797 22.1% 6.0%

Interest expense 31,218 24,475 28,968 27.6% 7.8%

Net interest income 26,891 23,127 25,829 16.3% 4.1%

Noninterest income 12,053 9,539 11,646 26.4% 3.5%

Total income 38,944 32,665 37,475 19.2% 3.9%

- Employee costs 7,452 7,230 7,204 3.1% 3.4%

- Other operating expenses 10,542 8,188 9,945 28.7% 6.0%

Operating expenses 17,994 15,417 17,150 16.7% 4.9%

Pre-provision profit 20,950 17,248 20,325 21.5% 3.1%

Provisions 3,538 2,165 4,696 63.4% -24.7%

Profit before tax 17,412 15,083 15,629 15.4% 11.4%

Tax expense 5,995 5,140 5,380 16.6% 11.4%

Net profit 11,417 9,943 10,249 14.8% 11.4%

Source: Company, KRChoksey Research

Balance Sheet items Q2FY19 Q2FY18 Q1FY19 Y-o-Y Q-o-Q

Deposits 20,58,298 16,56,709 18,97,440 24.2% 8.5%

Borrowings 3,25,835 2,59,229 3,34,940 25.7% -2.7%

Investments 6,79,150 5,27,965 7,10,250 28.6% -4.4%

Advances 18,49,403 15,25,741 17,69,270 21.2% 4.5%

Total assets 28,88,361 23,69,695 27,14,890 21.9% 6.4%

Source: Company, KRChoksey Research

ANALYST KRChoksey Research +91-22-6696 5555 / +91-22-6691 9576

Raghav Garg, raghav.garg@krchoksey.com, +91-22-6696 5584 is also available on Bloomberg KRCS<GO> www.krchoksey.com
Anushka Chhajed, anushka.chhajed@krchoksey.com, +91-22-6696 5620 Thomson Reuters, Factset and Capital IQ
India Equity Institutional Research II Result Update – Q2FY19 II 25th October, 2018 Page 6

Kotak Mahindra Bank Ltd

Quarterly analysis table Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19
Spread Analysis
Yield on avg advances (%) 10.7% 10.2% 10.0% 9.7% 9.7% 9.5% 9.6% 9.9%

Yield on avg interest earning

9.5% 9.0% 8.9% 8.6% 8.6% 8.7% 8.5% 8.6%
assets (%)

Cost of funds (%) 5.9% 5.2% 5.3% 5.2% 5.3% 5.2% 5.3% 5.4%
NIM (%) (calc.) 4.4% 4.4% 4.3% 4.2% 4.1% 4.2% 4.0% 4.0%
Asset quality
Gross NPA 31,779 35,786 37,266 38,142 37,150 38,254 38,995 40,337
Net NPA 13,791 17,181 17,779 19,188 17,280 16,651 15,271 15,008
GNPA (%) 2.4% 2.6% 2.6% 2.5% 2.3% 2.2% 2.2% 2.2%
NNPA (%) 1.1% 1.3% 1.3% 1.3% 1.1% 1.0% 0.9% 0.9%
PCR (%) 56.6% 52.0% 52.3% 49.7% 53.5% 56.5% 60.8% 62.8%
Credit costs (%) 0.4% 0.5% 0.4% 0.4% 0.4% 0.5% 0.7% 0.5%
Key ratios
Cost to income ratio (%) 48.4% 46.2% 49.4% 47.2% 47.0% 45.9% 45.8% 46.2%
C/D ratio (%) 86.5% 86.4% 87.1% 92.1% 88.0% 88.1% 93.2% 89.9%
SA (%) 16.2% 17.6% 17.0% 15.5% 14.3% 16.7% 15.1% 15.0%
CA (%) 25.8% 26.4% 26.9% 32.3% 32.3% 34.0% 35.1% 35.3%
CASA (%) 42.0% 44.0% 43.9% 47.8% 46.7% 50.8% 50.3% 50.2%
RoA (%) 1.8% 1.9% 1.7% 1.7% 1.7% 1.8% 1.5% 1.6%
Leverage (x) 7.6 7.7 7.1 6.7 6.8 7.0 7.1 7.1
RoE (%) 13.5% 14.4% 11.8% 11.4% 11.8% 12.2% 10.8% 11.6%
CRAR (%) 16.0% 16.8% 19.2% 18.4% 17.1% 18.2% 18.3% 18.0%
Loan mix (%) - standalone
Corporate Banking 32.9% 30.6% 32.3% 32.1% 31.4% 30.7% 32.6% 31.4%
CV/CE 7.5% 8.0% 8.0% 8.0% 8.3% 9.0% 9.1% 9.2%
Agriculture Division 12.8% 13.9% 13.0% 12.9% 12.9% 13.5% 12.0% 12.1%
Business Banking 12.9% 13.1% 12.3% 11.9% 11.3% 10.8% 10.2% 10.0%
Home Loans and LAP 19.4% 19.2% 19.3% 19.3% 19.5% 19.1% 19.2% 19.5%
Small Business, PL & Credit
12.2% 12.8% 12.8% 13.7% 14.4% 14.8% 14.8% 15.7%
Cards
Others 2.4% 2.3% 2.2% 2.1% 2.2% 2.1% 2.1% 2.0%
Advances growth (yoy) (%) 12.1% 14.7% 17.9% 21.1% 23.1% 24.7% 24.2% 21.2%
Source: Company, KRChoksey Research

ANALYST KRChoksey Research +91-22-6696 5555 / +91-22-6691 9576

Raghav Garg, raghav.garg@krchoksey.com, +91-22-6696 5584 is also available on Bloomberg KRCS<GO> www.krchoksey.com
Anushka Chhajed, anushka.chhajed@krchoksey.com, +91-22-6696 5620 Thomson Reuters, Factset and Capital IQ
India Equity Institutional Research II Result Update – Q2FY19 II 25th October, 2018 Page 7

Kotak Mahindra Bank Ltd

Subsidiaries’ financials - Amounts in INR mn
Kotak Mahindra Prime Q2FY19 Q2FY18 Q1FY19 YoY (%) QoQ (%) FY18 FY17
NII 2,660 2,760 2,710 -3.6% -1.8% 11,150 10,170
Other income 890 540 570 64.8% 56.1% 2,560 2,250
Total income 3,550 3,300 3,280 7.6% 8.2% 13,710 12,420
PBT 2,380 2,290 2,140 3.9% 11.2% 9,020 7,880
PAT 1,570 1,500 1,390 4.7% 12.9% 5,900 5,150
CAR (%) 18.2% - 17.7% 0.0282
ROA (%) - annualized 2.0% - 1.8%
Customer assets 2,85,440 2,83,730 2,79,080 0.6% 2.3% 2,80,180 2,51,850
Net NPA (%) 0.40% 0.41% 0.39% 0.4% 0.4%
Source: Company, KRChoksey Research

Kotak Mahindra Investments Q2FY19 Q2FY18 Q1FY19 YoY (%) QoQ (%) FY18 FY17
NII 610 760 720 -19.7% -15.3% 3,040 2,700
Other income 240 240 160 0.0% 50.0% 1220 810
Total income 850 1,000 880 -15.0% -3.4% 4,260 3,510
PBT 700 840 740 -16.7% -5.4% 3,670 2,900
PAT 450 550 480 -18.2% -6.3% 2,450 1,960
CAR (%) 20.7% - 19.3%
ROA (%) - annualized 2.0% - 2.2%
Loan book 79,550 72,300 77,050 10.0% 3.2% 79,000 70,000
Net NPA (%) 0.04% 0.06% 0.00% 0.0% 0.1%
Source: Company, KRChoksey Research

Kotak Securities Q2FY19 Q2FY18 Q1FY19 YoY (%) QoQ (%) FY18 FY17
Total income 4,070 3,660 4,150 11.2% -1.9% 16,550 11,840
PBT 1,690 1,770 1,960 -4.5% -13.8% 7,960 5,430
PAT 1,120 1180 1,300 -5.1% -13.8% 5,310 3,610
Market share (%) 2.5% 1.9% 1.7% 1.9% 2.2%
Source: Company, KRChoksey Research

Kotak Mahindra Life Insurance Q2FY19 Q2FY18 Q1FY19 YoY (%) QoQ (%) FY18 FY17
New business premium 8,240 6,420 6,590 28.3% 25.0% 34,040 22,780
Total premium 17,180 13,080 1,18,80 31.3% 44.6% 65,990 51,400
PAT 1270 1000 1170 27.0% 8.5% 4,130 3,030
Solvency (x) 3.10 3.08 3.11 3.1 3.0
Source: Company, KRChoksey Research

Kotak Mahindra Capital Company Q2FY19 Q2FY18 Q1FY19 YoY (%) QoQ (%) FY18 FY17
Total income 430 150 560 186.7% -23.2% 1,810 1,360
PBT 210 -20 360 -1150.0% -41.7% 1020 610
PAT 140 -10 250 -1500.0% -44.0% 650 460
Source: Company, KRChoksey Research

Kotak Mahindra AMC Q2FY19 Q2FY18 Q1FY19 YoY (%) QoQ (%) FY18 FY17
PBT 790 340 770 132.4% 2.6% 1700 840
PAT 520 230 510 126.1% 2.0% 1150 560
Average AUM 13,55,080 11,08,320 12,85,660 22.3% 5.4% 11,53,990 7,70,910
Source: Company, KRChoksey Research

ANALYST KRChoksey Research +91-22-6696 5555 / +91-22-6691 9576

Raghav Garg, raghav.garg@krchoksey.com, +91-22-6696 5584 is also available on Bloomberg KRCS<GO> www.krchoksey.com
Anushka Chhajed, anushka.chhajed@krchoksey.com, +91-22-6696 5620 Thomson Reuters, Factset and Capital IQ
India Equity Institutional Research II Result Update – Q2FY19 II 25th October, 2018 Page 8

Kotak Mahindra Bank Ltd

Valuation: We continue to believe in Kotak’s “one-stop shop” story given the well-established bank, insurance arms, AMC and
broking offerings along with other services which comprehensively cover the whole gamut of retail and corporate customers.
However, on account of near-term uncertainty regarding stake dilution, we lower our multiple on the standalone bank to 4.8x
ABV (+10% premium to last 3-years’ avg). We have also cut our growth and NIM projections and multiple for Kotak Prime given the
latest management commentary on the lines of increased competition and unfavorable pricing. We maintain BUY.

Kotak Mahindra Bank - SOTP valuation

Intrinsic value
Entity Valuation methodology Holding
per share (INR)

FY20E
KMB - Standalone banking business / Parent 4.8x FY20E ABV 100.0% 1,178
Kotak Prime 1.5x FY20E BV 100.0% 48
Kotak Life Insurance 3x FY20E GWP 100.0% 165
Kotak Securities 15x FY20E EPS 100.0% 64
Kotak Capital 15x FY20E EPS 100.0% 7
Kotak AMC 5% FY20E AAUM 100.0% 59
Others 10
Holding co. discount (%) 20%
Value of subs (INR per share) 283
Value of total (INR per share) 1,461
CMP (INR) 1,182
Upside (%) 24%

Consolidated net worth (INR Bn) Holding FY20E

KMB - Standalone banking business / Parent 100.0% 493
Kotak Prime 100.0% 61
Kotak Life Insurance 100.0% 31
Kotak Securities 100.0% 50
Kotak Capital 100.0% 7
Kotak AMC 100.0% 5
Total consolidated net worth* 647
Estimated value of the group (as per SoTP) 2,785

Consolidated PAT (INR Bn) Holding FY20E

KMB - Standalone banking business / Parent 100.0% 68.4
Kotak Prime 100.0% 6.3
Kotak Life Insurance 100.0% 5.4
Kotak Securities 100.0% 8.1
Kotak Capital 100.0% 1.0
Kotak AMC 100.0% 1.5
Total consolidated PAT* 90.7
*only considers the main subs

ANALYST KRChoksey Research +91-22-6696 5555 / +91-22-6691 9576

Raghav Garg, raghav.garg@krchoksey.com, +91-22-6696 5584 is also available on Bloomberg KRCS<GO> www.krchoksey.com
Anushka Chhajed, anushka.chhajed@krchoksey.com, +91-22-6696 5620 Thomson Reuters, Factset and Capital IQ
India Equity Institutional Research II Result Update – Q2FY19 II 25th October, 2018 Page 9

Kotak Mahindra Bank Ltd

Amounts in INR Million

Income Statement FY2015 FY2016 FY2017 FY2018 FY2019E FY2020E

Interest income 97,199 1,63,842 1,76,989 1,97,486 2,55,512 3,20,820

Interest expense 54,961 94,838 95,728 1,02,168 1,35,665 1,70,201

Net interest income 42,237 69,004 81,261 95,318 1,19,847 1,50,620

Non interest income 20,285 26,122 34,772 40,521 50,029 61,392

Total income 62,522 95,126 1,16,033 1,35,840 1,69,876 2,12,012

Operating expenses 32,547 54,715 56,185 64,256 73,552 91,488

Employee costs 95,069 1,49,841 1,72,218 2,00,096 2,43,429 3,03,500

Other operating expenses 17,880 26,546 28,500 34,754 42,015 49,893

Pre-provision profit 29,975 40,411 59,848 71,583 96,324 1,20,524

Provisions 1,645 9,174 8,367 9,399 13,205 16,361

Profit before tax 28,330 31,237 51,481 62,184 83,120 1,04,163

Tax expense 9,670 10,339 17,366 21,339 28,524 35,745

Net profit 18,660 20,898 34,115 40,845 54,596 68,418

Source: Company, KRChoksey Research

Balance sheet FY2015 FY2016 FY2017 FY2018 FY2019E FY2020E

SOURCES OF FUNDS

Shareholders' funds 1,41,411 2,39,591 2,76,161 3,74,816 4,27,274 4,93,011

Borrowings 1,21,497 2,09,753 2,10,955 2,51,542 2,99,937 3,57,643

Deposits 7,48,603 13,86,430 15,74,259 19,26,430 24,08,038 30,10,048

Other liabilities & provisions 48,580 86,790 84,507 96,521 1,01,229 1,25,465

TOTAL LIABILITIES & EQUITY 10,60,121 19,22,598 21,45,900 26,49,332 32,36,479 39,86,167

USES OF FUNDS

Cash and cash equivalent 62,624 1,08,797 2,25,720 1,96,201 2,31,758 2,89,698

Investments 3,04,211 5,12,602 4,50,742 6,45,623 7,70,572 9,33,115

Advances 6,61,607 11,86,653 13,60,821 16,97,179 21,16,675 26,39,859

Fixed & other assets 31,679 1,14,546 1,08,616 1,10,329 1,17,473 1,23,495

TOTAL ASSETS 10,60,121 19,22,598 21,45,900 26,49,332 32,36,479 39,86,167

Source: Company, KRChoksey Research

ANALYST KRChoksey Research 91-22-6696 5555 / 91-22-6691 9569

Vaibhav Chowdhry, vaibhav.chowdhry@krchoksey.com, 91-22-6696 5571 is also available on Bloomberg KRCS<GO> www.krchoksey.com
Thomson Reuters, Factset and Capital IQ
India Equity Institutional Research II Result Update – Q2FY19 II 25th October, 2018 Page 10

Kotak Mahindra Bank Ltd

Key ratios FY2015 FY2016 FY2017 FY2018 FY2019E FY2020E
Growth rates
Advances (%) 24.8% 79.4% 14.7% 24.7% 24.7% 24.7%
Deposits (%) 26.7% 85.2% 13.5% 22.4% 25.0% 25.0%
Total assets (%) 21.0% 81.4% 11.6% 23.5% 22.2% 23.2%
NII (%) 13.5% 63.4% 17.8% 17.3% 25.7% 25.7%
Pre-provisioning profit (%) 16.3% 34.8% 48.1% 19.6% 34.6% 25.1%
PAT (%) 24.2% 12.0% 63.2% 19.7% 33.7% 25.3%
Balance sheet ratios
Credit/Deposit (%) 88.4% 85.6% 86.4% 88.1% 87.9% 87.7%
CASA (%) 36.4% 38.1% 44.0% 50.8% 51.7% 53.1%
Advances/Total assets (%) 62.4% 61.7% 63.4% 64.1% 65.4% 66.2%
Leverage (x) 7.3 7.8 7.9 7.4 7.3 7.8
CAR (%) 17.2% 16.3% 16.8% 18.2% 16.3% 15.3%
Operating efficiency
Cost/income (%) 52.1% 57.5% 48.4% 47.3% 43.3% 43.2%
Opex/total assets (%) 3.1% 2.8% 2.6% 2.4% 2.3% 2.3%
Opex/total interest earning assets (%) 3.5% 3.9% 2.9% 2.8% 2.6% 2.6%
Profitability
NIM (%) 4.5% 4.9% 4.2% 4.2% 4.2% 4.3%
RoA (%) 1.9% 1.4% 1.7% 1.7% 1.9% 1.9%
RoE (%) 14.1% 11.0% 13.2% 12.5% 13.6% 14.9%
Asset quality
Gross NPA (%) 1.9% 2.4% 2.6% 2.2% 2.0% 1.8%
Net NPA (%) 0.9% 1.1% 1.3% 1.0% 0.9% 0.8%
PCR (%) 50.8% 55.5% 52.0% 56.5% 58.0% 58.0%
Net slippage (%) 0.3% 2.4% 0.6% 0.2% 0.3% 0.2%
Credit cost (%) 0.3% 0.8% 0.5% 0.4% 0.5% 0.5%
Per share data
EPS (INR) 24.2 11.4 18.5 21.4 28.6 35.9
BV (INR) 183.1 130.6 150.0 196.7 224.2 258.6
ABV (INR) 175.2 123.7 140.7 187.9 214.6 248.0
Source: Company, KRChoksey Research

ANALYST KRChoksey Research +91-22-6696 5555 / +91-22-6691 9576

Raghav Garg, raghav.garg@krchoksey.com, +91-22-6696 5584 is also available on Bloomberg KRCS<GO> www.krchoksey.com
Anushka Chhajed, anushka.chhajed@krchoksey.com, +91-22-6696 5620 Thomson Reuters, Factset and Capital IQ
India Equity Institutional Research II Result Update – Q2FY19 II 25th October, 2018 Page 11

Kotak Mahindra Bank Ltd

Kotak Mahindra Bank Rating Legend
Date CMP (INR) TP (INR) Recommendation Our Rating Upside
25-Oct-18 1182 1461 BUY Buy More than 15%
30-Aug-18 1276 1544 BUY
20-Jul-18 1333 1526 BUY Accumulate 5% - 15%
02-May-18 1209 1402 BUY Hold 0 – 5%
22-Jan-18 1071 1172 ACCUMULATE
26-Oct-17 1014 1104 ACCUMULATE Reduce -5% – 0
21-Jul-17 980 1104 ACCUMULATE Sell Less than -5%
27-Jan-16 795 953 BUY
26-Oct-16 820 953 BUY
25-July-16 760 882 ACCUMULATE
12-May-16 739 882 ACCUMULATE
19-Jan-16 669 721 HOLD
03-Nov-15 685 720 HOLD
13-Apr-15 1,422 1,400 REDUCE
21-Jan-15 1,389 1,400 HOLD
7-Jan-15 1,251 1,260 HOLD
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ANALYST KRChoksey Research +91-22-6696 5555 / +91-22-6691 9576

Raghav Garg, raghav.garg@krchoksey.com, +91-22-6696 5584 is also available on Bloomberg KRCS<GO> www.krchoksey.com
Anushka Chhajed, anushka.chhajed@krchoksey.com, +91-22-6696 5620 Thomson Reuters, Factset and Capital IQ