Synopsis: Kotak Mahindra Bank's share price has dropped by 10% following regulatory actions by the Reserve Bank of India (RBI), sparking concerns among analysts about the bank's growth. The RBI's directives, including restrictions on new customer onboarding and credit card issuance, raise questions about the bank's operational and financial outlook. Analysts anticipate a review of these restrictions after an external audit, but uncertainties linger regarding the bank's future trajectory.
Kotak Mahindra Bank witnessed a sharp decline of 10% in its share price, attributed to the perceived negative impact of regulatory actions by the Reserve Bank of India (RBI) on the bank's growth prospects, as indicated by analysts. They anticipate a review of these restrictions upon completion of an external audit and corrective action plan, a process typically spanning 6-12 months.
Following the RBI's directives, Kotak Mahindra Bank was instructed to halt new customer onboarding through its online and mobile banking channels and cease issuing fresh credit cards immediately. The central bank's decision stemmed from identified deficiencies in the bank's IT systems during 2022 and 2023.
Despite the regulatory measures, Kotak Mahindra Bank remains confident in its ability to mitigate the impact on its overall business. The bank has emphasized its commitment to strengthening its IT systems and collaborating with the RBI to address outstanding issues promptly. It has assured existing customers of uninterrupted services while continuing to onboard new customers through its branches, excluding new credit card issuance.
Analysts anticipate adverse effects on the bank's growth trajectory, particularly affecting its CASA ratio and new card acquisition, leading to potential earnings declines in the medium term. Emkay Global Financial Services has downgraded its rating on the stock and adjusted the price target accordingly.
StoxBox's Research Analyst, Shreyansh Shah, highlights concerns about the bank's ability to cross-sell products, given its reliance on online channels for customer acquisition. He also suggests that the bank's valuation premiums may suffer due to governance concerns following Uday Kotak's departure.
Citi analysts express apprehensions about the impact on the bank's growth, net interest margin (NIM), and fee income, considering its significant digital customer acquisition and product offerings.
Jefferies warns of potential revenue and cost implications if the resolution process extends beyond six months, maintaining a 'Hold' recommendation on Kotak Mahindra Bank shares.
As of 9:20 am, Kotak Mahindra Bank shares were trading 10% lower at INR1,658.75 on the BSE.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies. We advise investors to check with certified experts before making any investment decisions.
