Kotak Bank records 8% PAT growth in Q3 despite AIF provisions and margin pressure

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Kotak Mahindra Bank posted a net profit of ₹3,005 crore, up only 8 per cent on year. Sequentially, profit after tax was 5.8 per cent lower.

The lender made a one-time provision of ₹190 crore against the lender’s AIF investments. Trading and MTM (marked to market) loss of ₹168 crore during the quarter also weighed on the bottom line.

Net Interest Income (NII) rose 16 per cent yoy and 4 per cent qoq to ₹6,554 crore. Net Interest Margin (NIM) for the quarter was 5.22 per cent, flat on quarter and lower than 5.47 per cent a year ago. In the earnings call, CFO Jaimin Bhatt said margins will remain under pressure due to the elevated cost of funds.

Advances increased 19 per cent YoY and 4 per cent QoQ to ₹3.7 lakh crore. Including credit substitutes, the growth was 17 per cent yoy to ₹4 lakh crore as at the end of December. Unsecured retail loans comprised 11.6 per cent of total loans compared with 9.3 per cent a year ago.

The bank is quite comfortable with growing the unsecured retail book share to “early to mid-teens”, is on that trajectory, and has no plans to “put a break” on growth, Bhatt said. Whole-Time Director Shanti Ekambaram said that the growth is “very much in-line with strategy” and the portfolio stress is “still stable and manageable”.

Deposits grew 18.5 per cent YoY and 1.9 per cent QoQ to ₹4.1 lakh crore as at the end of December, largely led by a 43 per cent yoy increase in term deposits to Rs 2.2 lakh crore. CASA ratio stood at 47.7 per cent, worse than both 48.3 per cent a quarter ago and 53.3 per cent a year ago.

Ekambaram said that the bank’s ‘ActivMoney’ offering has done well even amid a shift in customer investments to fixed deposits and higher-yielding investments. While CASA deposits have grown, they will continue to be a challenge owing to the tight system liquidity, she said, adding that the focus will remain on ActivMoney, term and CASA deposits while staying away from pricey wholesale and bulk deposits. In addition, the bank is also strategising around specific customer and product segments such as ActivMoney and senior citizens. “It’s a competitive market, and you have to fight and take your share of it”.

Kotak Bank is also looking at and will continue to look at other alternatives, such as borrowings to reprice liabilities at a more cost- effective level, Bhatt said. Ekambaram added that the bank will continue to explore long-term funding sources, such as the recent infrastructure bond issue. 

Whole-Time Director KVS Manian said slippages of ₹1,177 crore during the quarter were largely from the unsecured retail portfolio. The gross NPA ratio stood at 1.73 per cent, better than 1.90 per cent a year ago but slightly worse than 1.72 per cent a quarter ago. The net NPA ratio improved to 0.34 per cent from 0.43 per cent in the previous year and 0.37 per cent in the previous quarter.