he appointment of Ashok Vaswani as managing director and chief executive officer of Kotak Mahindra bank has removed a key overhang from the bank’s stock price, say analysts.
“Overhang relating to MD&CEO position goes away with Mr. Ashok Vaswani being approved by RBI. His nomination suggests bank’s long term focus on digital retail banking,” brokerage firm Prabhudas Lilladher said in a report on Monday.
The announcement came as a surprise for many, who had the bank to elevate an internal candidate to the post.
Vaswani has over 30 years of experience at multinational banks. He has served as the chief executive officer of Barclays Bank, UK and subsequently chief executive officer of their global consumer, private, corporate and payments businesses and member of the group executive committee.
Previously, Vaswani was chief executive officer of Citigroup Asia Pacific and member of the Citigroup global operating and management committees.
“We believe that execution under the new CEO will remain a key monitorable to assess the stock’s performance over the near term,” Motilal Oswal Financial Services said in a report.
With this announcement, JM Financial contends that the focus will now shift to strategic objectives of the new leadership.
The bank’s advances rose 21% year-on-year(y-o-y) to Rs 3.6 trillion as on September 30, aided by a growth in corporate loans, commercial vehicles, retail microfinance, agriculture, small and medium-sized enterprise segment.
Deposits rose 21.2% y-o-y to Rs 4 trillion driven by the newly launched ActivMoney product. The long-term flow of deposits will increase due to this product, say analysts.
Net interest margin rose to 5.22% in the September quarter from 5.15% a year ago. Return on assets rose to 2.68% in the September quarter from 2.61% a year ago.
Analysts feel that the bank’s Stock offers compelling risk-reward at current valuations for the core banking business given its risk-adjusted margins and strong return on assets.
The stock closed 1.9% lower at Rs 1,736.95 on the National Stock Exchange.
“With leverage (Loans/Equity) at 3.9x, organic capital productivity is now front and centre in any discussion on valuations (3.5x FY24E core BVPS). We think accelerated asset growth remains the only organic solution,” BNP Paribas Securities India said.
“The ask for leverage/core RoE to be at 5x/18% that would justify current valuations is a 3-yr loan CAGR in early twenties,” it added.
