Kotak Mahindra Bank: Key Takeaways

    * Consolidated total income at Rs 1685 crore Vs Rs 1850 crore (QoQ) and Vs Rs 2483 crore (YoY).
    * Cons Capital Adequacy Ratio at around 20% ( and at 21% incl current years' profits)
    * Cons advances at Rs 23,865 crore Vs Rs 21,420 crore (YoY), Cons NIM at 6% Vs 5.7% (YoY). Cons NPA at 1.01%.
    * Cons book value per share at Rs 183/sh.
    * Standalone PAT at Rs 71 crore Vs Rs 48 crore (QoQ), standalone NII at Rs 383 crore Vs Rs 347 crore (YoY). Have 209 branches and 375 ATMs, as on December 2008.
    * Deposits as on December 31, 2008 were Rs 14,841 crore Vs Rs 14,279 crore (YoY). CASA deposits comprised 26% of total deposits. Total number of deposit accounts over 10 lakhs.
    * Standalone CAR at 17% Vs 18.4% (YoY). Tier-1 ratio at 13.8%.
    * Bank to use capital effeciently in the future. Bank will continue to be conservative on credit.
    * Taking calibrated exposure on prop. side.
    * Market share lost in Kotak Securities, Rs 39.2 crore taken off from topline.
    * Bank not carrying significant portfolio in aquisitions, continue to follow stringent RBI guidelines.
    * Standard provision stands at 2%.
    * Asset Under Management (AUM) stands at Rs 14,000 crore.

Everything looks cheap relative to their prospectives during the bull period

Their NPAs are very high.
What is their credit/deposit ratio?
Their growth might be hampered if NPAs are high and/or if C/D is high?

Negative aricle on KMB got it from a blog. I am not familiar with numbers. Can some one verify them?

Kotak Mahindra Bank-The Mirror Cracked From Side To Side
  The long held halo of invincibility built around private sector banks and the resultant high valuations that they have been fetching so far, should get settled once and for all after looking up the Q3 numbers of Kotak Mahindra Bank.

  Not only is the bank performance an unmitigated disaster, it holds evil portents for the future. The stock should trade between Rs 125 to Rs 150 at 7 times FY09e EPS and 0.75 times price to estimated book value for March 2009.

  Dame Agatha Christie might in some unique way have been thinking of Kotak Bank when she wrote her memorable novel, "The Mirror Cracked From Side To Side" way back in 1962.

  Now let us look at the numbers presented by Kotak Bank:

  -Total Assets managed/Advised by the Group as on December 31, 2008 were Rs 320 bn. Compare this to managed assets of Rs 372 bn in September 2008 and Rs 460 bn in December 2007, and the contraction of operational size becomes visible. A contraction of Rs 140 bn yoy.

  -Standalone PAT of Kotak Bank is Rs 71 crore for Q3 FY08, down 30 per cent qoq over December 08 PAT of Rs 101 crore.

  -For the fourth consecutive quarter Kotak Bank has reported Negative Revenues from Treasury-Insurance activities. The Negative Revenues being Rs 4798 mn for the 9 months to December 2008, and Rs 1658 mn and Rs 585 mn respectively for Q308, and Q208.

  -Retail liabilities and branch banking continue to bleed Kotak Bank reporting PBT loss of Rs 1847 mn  (Rs 1356 mn) for the nine months to December 2008.

  -Losses on Life Insurance on the PBT level for the nine months to December 2008 are Rs 222 mn (Rs 729 mn), and losses at the PBT level on Credit Cards are a whopping Rs 488 mn for the period to December 2008. Incidentally credit cards were launched only in 2008, so this loss is a first of its kind for Kotak Bank.

  -Net NPAs have tripled to 1 per cent as compared to December 2007 and March 2008 Net NPAs of 0.3 per cent.

  -As a consequence of the above, Consolidated profits for Kotak Bank have dropped down to Rs 4417 mn in the nine months to December 2008, against comparable yoy figures of Rs 7511 mn, a fall of 42 per cent.

  -Consolidated nine month EPS works out to Rs 12.7 against yoy figure of Rs 22.30 again a fall of 44 per cent.

  -Book Value per share of Kotak Bank is Rs 183, a mere increase of Rs 4 per share since September 2008 and a miserly increase of 8 per cent over March 2008 book value of Rs 168 per share.

  -Considering the de-growth of the Bank's Asset size and the none too rosy economic scenario unfolding ahead of us, Kotak Bank does not deserve a PE of 17 on forecast FY09 EPS of Rs 16. Further it does not justify a premium multiple to December 2008 Book Value of Rs 183 per share.

  -The stock should trade at single digit PE multiples on the lower side say 7-8, and a Price to Book exceeding no more than 0.75 times.

  -Kotak Mahindra Bank stock could lose atleast 50 per cent of its market capitalisation from here to March 2009, a possible target price of Rs 125-Rs 150 per share. This could happen even within the next few days.