Kotak Shares Soar on Analyst Upgrades as Asset Quality Holds Up

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Kotak Mahindra Bank Ltd.’s shares jumped as the lender reported a decline in new bad loans in the third quarter, triggering analyst upgrades.

Shares surged as much as 9.7%, the most since October 2021, as at least eight brokerages, including including Nuvama and ICICI Securities, put a buy recommendation on the stock.

Kotak, India’s third-biggest private lender by market value, on Saturday reported a 12% decline in fresh slippages compared to the previous three months. Net income climbed nearly 10% from the year-ago period to about 33 billion rupees ($382 million), broadly in line with the street estimate.

Kotak’s improving asset quality is offering optimism for lenders at a time when the Indian banking industry is grappling with a spike in bad loans as economic growth slows. Axis Bank reported a 22% jump in slippages last week.

While other major banks are yet to report their performance, analysts at Nuvama say Kotak is likely to be the only private-sector lender to show lower slippages. It “offers growth, quality and a safe place to hide in a milieu of weak deposits and high non-performing loans,” the brokerage said in a note.

Top private lender HDFC Bank Ltd. will report earnings Wednesday, while ICICI Bank Ltd. is expected to release its results over the weekend.

--With assistance from Preeti Singh.

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