Target: ₹2,500
CMP: ₹2,195.10
Kotak Mahindra Bank (KMB) continues to align its balance sheet expansion with a disciplined growth framework of ~1.5-2.0x nominal GDP while steadily improving business granularity through retail and SME-led growth.
KMB witnessed near-term NIM volatility and elevated credit costs earlier in FY26; however, operating performance is expected to normalise as funding-cost repricing plays out and unsecured stress subsides.
The bank remains focused on profitable, calibrated growth, with retail, SME, agri and tractor portfolios supporting balance-sheet expansion, while CV and unsecured exposures remain well managed.
Subsidiaries continue to provide structural earnings diversification, supporting consolidated profitability over the medium term.
Management has reiterated that secured lending will grow faster than unsecured, although absolute unsecured balances will continue to expand as risk conditions ease. Retail assets such as housing loans and LAP continue to perform well, while wholesale growth will remain selective and margin-led, with preference for flow-based businesses rather than long-tenor balance-sheet deployment.
Disciplined execution, strong liability franchise and capital strength underpin confidence in sustainable RoA of over 2 per cent.
We thus estimate KMB to deliver robust return ratios, with RoA/RoE at 2/12.7 per cent by FY27E. Retain BUY with TP of ₹2,500 (2.5x FY27E ABV, including an SoTP value of ₹775 for subs).