Kotak Bank Q1 PAT up 67% on strong NII, other income growth

Kotak Mahindra Bank reported a net profit of INR 3,452 crore for the first quarter of FY24, up 67 percent year-on-year driven by strong growth in net interest and other income.

Fee and service income increased by 20 per cent year-on-year at INR 1,827 crore for the quarter.

Sequentially, profit after tax decreased by 1.3 percent on account of higher provisions due to the increase in slippage as the bank held higher provisions for restructured and unsecured loans.

Net Interest Income (NII) increased by 33 per cent YoY at Rs.6,234 crore. The net interest margin (NIM) for the quarter was 5.57 percent.

On the earnings call, management said it expects NIM to continue to moderate in the next few quarters due to deposit repricing and eventually to stabilize at a long-term average of about 5.25 percent.

Customer assets, including advances and credit alternatives, increased by 18 per cent year-on-year to reach INR 3.6 crore on June 30. However, the bank continues to be cautious about growing the corporate portfolio given pricing issues in the market.

The bank expects loan growth for fiscal 24 in the high teens through the early 20’s, also supported by a recovery in corporate loans that grew 7 in a row during the quarter.

The bank said unsecured retail advances (including small retail financing) accounted for 10.7 percent of net advances as of June 30, up from 7.9 percent a year ago, with growth across sectors such as credit cards, personal and business loans, and microfinance institutions.

On the jitters in the unsecured book, Joint MD Dipak Gupta said the portfolio is holding well for the time being given the growth is on a small base. He said the bank, however, monitors and monitors the portfolio constantly to ensure the quality of the portfolio.

Bank deposits were at ₹3.9 crore as of 30 June, led by a 49 per cent growth in CASA deposits, largely led by current account deposits which grew by 8 per cent year-on-year.

Kotak Bank’s cost of money increased sequentially from the prior quarter, largely due to an increase in the share of higher cost ActivMoney and term deposits even as the cost of savings deposits declined due to lower 1 percent year-over-year growth.

The bank saw slippages of Rs 1,205 crore in the first quarter, of which Rs 288 crore were rewritten during the same quarter. Slips were a little higher, driven by unsecured retail loans and tractor financing. Refunds and promotions were at ₹692 crore for the quarter.

The bank’s overall NPA ratio improved to 1.77% from 1.78% in the previous quarter and 2.24% a year ago. The net NPA rate of 0.40 percent was also better than 0.62 percent in the previous year and 0.37 percent in the previous quarter.