Kotak Mahindra Bank surges ahead of ICICI Bank in terms of market-cap
Mumbai: Kotak Mahindra Bank surged past country's largest private sector lender ICICI Bank in market value, supported by strong fundamentals and deep market penetration that experts say make it best suited after HDFC Bank to capture growth coming from retail, capital markets and the corporate sector.
Billionaire Uday Kotak-promoted Kotak Bank's market capitalisation rose to Rs 1,60,152 crore based on Thursday's closing stock price on the Bombay Stock Exchange, compared with Rs 1,55,507 crore for ICICI Bank, show data compiled by ETIG Database.
“Investors are giving higher valuation to banks with less bad assets,“ said R Sreesankar, head of institutional equities at Prabhudas Lilladher, a broking firm.
“Large banks have been traditionally battling with stressed assets eating into profit margins.There could be still upside for banks like Kotak, as long as the underwriting is good and growth strong with less stressed assets,“ he said. “The valuation of these banks would remain high.“ At Kotak Bank, gross bad loans were 2.42% of total loans at the end of the December quarter, compared with 2.49% in the previous quarter and 2.30% a year earlier.
With a larger loan book, ICICI Bank has faced the brunt of sticky assets. Its gross bad loans rose to 7.9% at the end of December from 6.82% three months earlier.
December-quarter net profit at Kotak Mahindra rose 38.6% from a year earlier to `879.76 crore, aided by higher net interest income and other income. For the same period, ICICI Bank reported a 19.1% decline in net profit as asset quality worsened to a 13year low amid sluggish core interest income growth.
In the past year, ICICI Bank shares rose over 14%, while Kotak Mahindra Bank posted an impressive 32% gain.
“Kotak Bank's valuation will remain at a premium as compared to other private lenders,“ said Rajiv Mehta, assistant vicepresident at IIFL Wealth and Asset Management. “Due to its superior lending franchise and profitability, the bank is a darling for investors. Given high return on equity and low balance sheet risk, investors could still expect a 15-20% CAGR return on investment in coming years.“
Billionaire Uday Kotak-promoted Kotak Bank's market capitalisation rose to Rs 1,60,152 crore based on Thursday's closing stock price on the Bombay Stock Exchange, compared with Rs 1,55,507 crore for ICICI Bank, show data compiled by ETIG Database.
“Investors are giving higher valuation to banks with less bad assets,“ said R Sreesankar, head of institutional equities at Prabhudas Lilladher, a broking firm.
“Large banks have been traditionally battling with stressed assets eating into profit margins.There could be still upside for banks like Kotak, as long as the underwriting is good and growth strong with less stressed assets,“ he said. “The valuation of these banks would remain high.“ At Kotak Bank, gross bad loans were 2.42% of total loans at the end of the December quarter, compared with 2.49% in the previous quarter and 2.30% a year earlier.
With a larger loan book, ICICI Bank has faced the brunt of sticky assets. Its gross bad loans rose to 7.9% at the end of December from 6.82% three months earlier.
December-quarter net profit at Kotak Mahindra rose 38.6% from a year earlier to `879.76 crore, aided by higher net interest income and other income. For the same period, ICICI Bank reported a 19.1% decline in net profit as asset quality worsened to a 13year low amid sluggish core interest income growth.
In the past year, ICICI Bank shares rose over 14%, while Kotak Mahindra Bank posted an impressive 32% gain.
“Kotak Bank's valuation will remain at a premium as compared to other private lenders,“ said Rajiv Mehta, assistant vicepresident at IIFL Wealth and Asset Management. “Due to its superior lending franchise and profitability, the bank is a darling for investors. Given high return on equity and low balance sheet risk, investors could still expect a 15-20% CAGR return on investment in coming years.“
