In my view best banks can operate at 2-2.2% roa sustainably, it makes sense if bank is overcapitalized is looking to grow fast or acquisitions. However i wanted to know what can be the steady state capitalization levels, roe and roa for the bank to calculate its terminal value
Pre Covid CRAR was 17-18%, went up to 22-23% during Covid and is now in the late 21%s. I expect the CRAR to come down to pre Covid levels, increasing leverage. That’s a kicker for ROE. Besides, only now has Kotak started flexing its asset side muscles in high yield loans - unsecured PLs, Microfinance etc. So I expect higher yields from advances too. Given Kotak’s stellar deposit franchise, NIMs may stay elevated for a few more Qs due to this incremental retail lending.
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