Kotak Mahindra Bank First Quarter Results: The fourth largest private sector lender, Kotak Mahindra Bank, on Saturday reported a massive 67% year-on-year rise in stand-alone net income to Rs 3,452 crore for the June quarter, supported by an overall improvement in performance, particularly on the side of margins which hit a near high.
At a consolidated level, profit, which includes net earnings from its subsidiaries in brokerage/i-banking, ARC, wealth management, insurance and microfinance business and NBFC, rose 51% to Rs 4,150 crore, the city-based lender said in a statement.
Main net interest income rose 33% to Rs 6,234 crore, on the back of a higher net interest margin of 5.57%, which is near its peak, for the quarter under review, as the bank passed on the entire 250 basis point central bank hike to its customers without repricing deposits proportionately.
But its deputy chief executive Dipak Gupta, on the earnings call, tilted towards lower margins as the bank will have to reprice deposits again and set 5.25% as a reasonable margin for the full year.
Revenue from fees and services increased by 20% to Rs 1,827 crore and the Casa ratio stood at 49%.
Of this amount, the main contributor was market gains of Rs 240 crore against a net loss of Rs 850 crore over the past 12 months, Jaimin Bhatt, the group’s chairman and chief financial officer, told reporters.
Advances increased by 19% to Rs 3,37,031 crore, with client assets including advances and credit substitutes increasing by 18% to Rs 3,62,204 crore from Rs 3,06,123 crore in June 2022.
Retail unsecured advances, including retail microfinance, increased by 7.9%, from 7.9% to 10.7%.
Gupta said that despite some level of stress in the book led by credit cards, which have seen an industry-wide increase in delinquencies, can still deliver a fair level of risk-adjusted return and that the entire portfolio can go into the mid-teens, meaning the book can grow by up to around 15%.
“There’s some stress, I have to admit, but that doesn’t call for any action. Of course, we won’t wait for a lot of our unsecured assets to turn into duds to act. We’ll act in time, that’s for sure. But for now, we’re very comfortable with how the portfolio is performing from a risk-adjusted return perspective,” both Gupta and Bhatt said.
The bank’s outstanding credit is around Rs 11,360 crore, Bhatt said and this represents nearly 3% of the unsecured book, declining to quantify who is already stressed.
The NPA gross decreased by 1.77% to 6,587.43 RS crores against 7,223.54 RS RS and when they were 2.24% and NPA net fell to 0.40% or 1,579.62 RS crores against 0.62% or 2,143.06 RS crores, and the rate of provision coverage was 78%.
The bank has new slippage of Rs 1,205 crore but there were so immediate recoveries/adjustments of around Rs 300 crore so the net slippage is only around Rs 900 crore, Bhatt said.
Bhatt said most of the slippages came from retail books and tractors.
Provisions and contingencies almost doubled from 148.34 crore to Rs 413.78 crore.
Interest cost increased to Rs 4,834.08 crore from Rs 4,229.65 crore and overall operating expenses nearly doubled to Rs 9,889.62 crore from Rs 4,870.12 crore of which employee cost increased to Rs 2,434.06 crore from Rs 1,839.09 crore, mainly due to increased cost of pensions .
He seemed confident about handling the high level of attrition, saying churn is more at the lower and middle tier (20%), while churn at the top tier is manageable at around 10%.
At the lower level it is really high, Gupta said but did not quantify it.
Regarding the Expected Credit Loss (ECL) provision, Bhatt said it will be well below the industry average as our current provisions are much higher than needed and overall it will be some 100 crores more.
Regarding the sluggish growth in the corporate loan portfolio, Gupta said there is nothing that needs special attention as the first quarter is normally a slow season, but of course we want to grow this much larger portfolio.
The bank, which is known for its very high Casa levels, saw a drop in the same which Gupta attributed to the tightening of the interest rate regime.
Gupta said the bank added 24 lakh customers during the reporting period and the balance sheet crossed the Rs 5 lakh crore mark.
Capital adequacy ratio under Basel III stood at 23.3% and CET 1 ratio at 22.3% and consolidated capital and reserves and surplus stood at Rs 1,16,500 crore compared to Rs 1,00,078 crore in June 2022.
Consolidated client assets, which include advances and credit substitutes, increased by 19% from Rs 3,39,606 crore in June 2022 to Rs 4,05,775 crore in June 2023.
Total assets managed/advised by the group stood at Rs 4,66,878 crore, up 23% from Rs 3,78,474 crore in June 2022 and AUM alternative assets increased by 90% to Rs 46,443 crore.
