Kotak Mahindra Bank considers first stock split in 15 years
What's the story
Kotak Mahindra Bank, India's third-largest private lender by market value, is considering a stock split for the first time in 15 years. The bank's board will meet on November 21 to discuss the proposal of splitting its existing equity shares with a face value of ₹5 each. A stock split increases the total number of outstanding shares by dividing existing ones into smaller units.
Historical context
Kotak Mahindra Bank's last stock split was in 2010
The last time Kotak Mahindra Bank did a stock split was in 2010, according to Trendlyne data. The company's market capitalization is around ₹4.14 lakh crore. In the second quarter, it reported earnings of ₹3,253 crore and a year-on-year net interest income growth of 4% to about ₹7,311 crore. However, its margins slipped by 11 basis points sequentially in Q2 due to the full impact of June's repo rate cut and a change in loan mix toward retail assets.
Projections
Bank's future expectations and asset quality
Kotak Mahindra Bank expects its net interest margins (NIMs) to improve over the next two quarters, with a stronger exit rate expected in Q4. This will depend on the overall economic environment. The bank also expects credit card credit costs to gradually moderate while microfinance (MFI) book has improved and personal loan (PL) credit costs have sharply declined. However, retail commercial vehicle (CV) remains under pressure with elevated credit costs likely to persist.
Market outlook
Analysts' ratings and target prices for Kotak Mahindra Bank
Analysts at Nomura and Nuvama have retained their 'Hold' rating on Kotak Mahindra Bank's stock. Nomura has kept a target price of ₹2,200 per share while Nuvama has revised its target price to ₹2,082. The global brokerage noted that NIM performance was impacted by an unfavorable loan mix and a slower increase in the credit-deposit ratio relative to peers.