International research and brokerage firm Jefferies has expressed the possibility of excellent profits in the shares of Kotak Mahindra Bank. The brokerage house, after meeting with the bank management, has enumerated many such reasons, due to which its shares can get momentum and investors can get good profits. The brokerage firm has revised its target price to Rs 2,340 from Rs 2100 and has rated it as ‘BUY’.
Bank’s focus on growing home loan space
According to the brokerage house, Kotak Mahindra Bank has now given full attention to the growing home loan space. The bank has reduced the home loan rates. The bank also seems to be in a good position regarding unsecured personal loans and credit card books. As far as the SME space is concerned, the bank’s exposure to ECLG loans is high. This is 5.4% of the entire loan. The book quality of the bank has been very good till the first quarter. It seems that the bank will take a lenient approach in lending to SMEs better in business in select sectors.
Thrust on growth through credit cards, gold loans and MFI loans
Despite the low funding cost, the bank is taking a slow approach in lending to large corporate houses. Actually, due to low yield, the bank is giving less loan to big companies. There will be only a limited change in this stance of the bank. Even if there is an increase in lending to large companies, it will still be less than the pace of retail loans. The bank seems very proactive about its inorganic edge. It is working on a growth strategy through credit cards, gold loans and MFI loans. Recently, it has acquired the small vehicle financing unit of Volkswagen. This has given the bank a loan business of 13 billion and 30,000 customers. The bank is focusing on expanding its scope in credit cards, gold financing and MFIs.
Succession plan strong, bank will get benefit
The bank also looks ready for a succession plan in view of the retirement of Promoter and CEO Uday Kotak and Joint MD Deepak Gupta. Uday Kotak can return as a non-executive director for eight years and guide the bank. The bank seems ready to work with changes both from outside and inside and by strategizing accordingly. Considering all these aspects, the bank has increased its target price from Rs 2100 to Rs 2340. The stock of the bank has been retained with the rating of ‘BUY’ given by the brokerage house.
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