Shares of Kotak Mahindra Bank declined over 3 per cent after UBS downgraded the stock to Sell, citing rising business risk and slowing loan growth.The brokerage firm also slashed its 12-month target price to Rs 1,050 from Rs 1,500 earlier.The scrip traded 3.33 per cent down at Rs 1,234 at around 9.50 am (IST), while the benchmark BSE Sensex was down 1.76 per cent at 30,611 at around the same time.Amid a slowing economy and asset quality risk, we believe Kotaks valuation premium to peer is at risk.
Given managements cautious stance and slowing loan growth, we lower our loan growth estimates from 8 per cent and 15 per cent in FY21 and FY 22 to 6 per cent and 12 per cent, respectively, UBS said.The brokerage house also added that the bank could offset earnings pressure by reducing interest on savings deposits, which is not factored into UBS estimates.Earlier, the private sector lender on April 6 reported a healthy jump in deposit base for the March quarter, and announced a reduction in savings account rates for high value customers.