Informist, Saturday, Jan 20, 2024
–Kotak Bank Oct-Dec net profit 30.05 bln rupees vs 27.92 bln
–Kotak Bank gross NPA ratio 1.73% as on Dec 31 vs 1.72% qtr ago
–Kotak Bank Oct-Dec provisions 5.79 bln rupees vs 1.49 bln
–Kotak Bank Oct-Dec total income 140.96 bln rupees vs 109.47 bln
–Kotak Bank Apr-Dec net profit 96.48 bln rupees vs 74.44 bln
–Kotak Bank Apr-Dec total income 407.87 bln rupees vs 293.27 bln
–Kotak Bank Basel III capital adequacy ratio 19.00% as on Dec 31
–Kotak Bank net NPA ratio 0.34% as on Dec 31 vs 0.37% qtr ago
–Kotak Bank: Provided 1.9 bln rupees Oct-Dec for investment in AIFs
–Kotak Bank Oct-Dec NII 65.54 bln rupees, up 16% on year
–Kotak Bk advances at 3.7 trln rupees as on Dec 31, up 19% on year
–Kotak Bk: Unsecured retail loans 11.6% of net advances as of Dec 31
–Kotak Bank current, savings account ratio 47.7% as on Dec 31
–Kotak Bank Oct-Dec credit cost 40 bps
–Kotak Bank Oct-Dec net interest margin 5.22%, flat vs Jul-Sep
–Kotak Bank Oct-Dec recoveries, upgrades at 8.30 bln rupees
–Kotak Bank Oct-Dec slippages 11.77 bln rupees
–Kotak Bank held 69.63 bln rupees provisions for loans as on Dec 31
–Kotak Bk deposits at 4.09 trln rupees on Dec 31 vs 3.45 trln yr ago
–Board OKs raising up to 100 bln rupees via NCDs in FY25
–Comfortable at growth in unsecured loan book
–Have additional exposure to AIF beyond 1.9 bln rupees
–We may have opened 100-150 branches in FY24
–High cost of funds may put pressure on NIMs going forward
–Additional exposure to AIFs does not have evergreening
–Expansion of NIMs likely to be challenging
–Slippages came mostly from retail, unsecured loans Oct-Dec
By Subhana Shaikh
MUMBAI – Kotak Mahindra Bank reported a net profit of 30.05 bln rupees for the December quarter, up 8% on year, but lower than estimates due to higher provisions. As per the average of estimates from 10 brokerage firms, the private bank’s net profit was seen at 31.82 bln rupees.
On a sequential basis, the net profit was down 6%.
However, higher net interest income on the back of stable margins boosted the bank’s stock. Post earnings at 1258 IST, shares of the bank extended gains and were up over 3% at 1,819.15 rupees on the National Stock Exchange. The scrip closed 2.4% higher at 1,806.80 rupees.
In the reporting quarter, the bank’s provisions and contingencies jumped nearly fourfold to 5.79 bln rupees. The jump was mainly due to provisions made for exposure to alternative investment funds.
During Oct-Dec, the private sector bank made provisions worth 1.9 bln rupees with respect to alternative investment funds pursuant to the Reserve Bank of India’s direction to lenders last month to liquidate within 30 days investment in schemes that, in turn, invest in debtor companies of the entities, or make 100% provision on such investments.
In the post-earnings conference call, Group President and Group Chief Financial Officer Jaimin Bhatt said that the bank has additional exposure to alternative investment funds apart from the 1.9 bln rupees, for which provisions were made. However, the exposure does not involve any kind of evergreening for which RBI introduced the circular, he said, adding that the bank remains watchful on this front.
Additionally, the change in accounting policy also led to a rise in provisions. The bank made provisions of 649.1 mln rupees for security receipts classified as non-performing investments during the quarter which were earlier accounted as mark-to-market losses under “other income”. While this accounting policy change has impacted the bank’s provisions, it had no impact on the profit after tax, according to an exchange filing by the lender.
Net interest income–the difference between interest earned and expended–rose 16% on year and over 4% on quarter to 65.54 bln rupees in Oct-Dec.
Consequently, net interest margin remained unchanged from the previous quarter at 5.22% in Oct-Dec. It was at 5.47% in the corresponding quarter a year ago. This is in line with the management’s commentary of keeping net interest margin at current levels. Analysts had expected the bank’s margins to contract during the quarter with Axis Securities expecting a compression of 10-15 basis points.
Going forward, Bhatt said that the rising cost of funds is likely to put some pressure on margins. He also said that expansion in margins seems like a challenge at this moment and will take a long time.
Total income increased 29% on year to 140.1 bln rupees in the December quarter. Fees and services income was up 26% on year to 21.44 bln rupees.
LOAN GROWTH
As on Dec 31, the bank’s total loans were up 19% on year at 3.72 trln rupees. Total customer assets, which comprise advances and credit substitutes, rose 17% on year to 4.01 trln rupees.
The share of unsecured retail loans–including retail microfinance–of total net advances rose to 11.6% as on Dec 31 against 9.3% a year ago. “If you look at the growth of unsecured loans, we have talked about the fact that we are quite comfortable to grow this. We had said that we are okay to take it to ‘early-to-mid-teens’ and we are on that trajectory. At this stage, there is no intent to put brakes on that,” Bhatt said.
Credit cards and retail microfinance continued to dominate the bank’s total loan book during the quarter. While retail microfinance rose 59% on year and 7% on quarter to 85.10 bln rupees, credit card loan outstanding surged 52% on year and 10% on quarter to 138.82 bln rupees as on Dec 31.
Corporate banking rose 13% on year to 842.46 bln rupees, home loans and loans against property were up 15% on year to 1.02 trln rupees. Tractor book grew 17% on year to 151.56 bln rupees.
Fresh slippages came in at 11.8 bln rupees–0.3% of the bank’s net advances–higher than 7.5 bln rupees a year ago. Of these, close to 3 bln rupees were upgraded during the quarter.
Meanwhile, loan recoveries and upgrades were lower at 8.3 bln rupees compared with 9.42 bln rupees a quarter ago. Special mention account-2 accounts, with payments overdue between 61 and 90 days, rose to 2.1 bln rupees as on Dec 31 against 1.91 bln rupees a year ago.
During Oct-Dec, the credit cost on advances was 40 basis points as compared to 47 bps a quarter ago.
Overall, asset quality remained stable with the gross non-performing asset ratio at 1.73% as compared to 1.72% a quarter ago. Net NPA ratio improved slightly to 0.34% as on Dec 31 as against 0.37% a quarter ago. The provision coverage ratio stood at 80.6% as on Dec 31.
As on Dec 31, the bank’s capital adequacy ratio under Basel-III was at 19.00%.
DEPOSITS – A CHALLENGE
The bank’s management said that deposit growth remains a challenge for the private sector lender. However, the bank has laid out its strategy with a focus on granular deposits through its ActivMoney product, term deposits and current account and savings account, whole-time director Shanti Ekambaram said.
As on Dec 31, the bank’s deposits rose to 4.09 trln rupees from 3.45 trln rupees a year ago and 4.00 trln rupees a quarter ago. CASA ratio declined to 47.7% in Oct-Dec from 53.3% a year ago and 48.3% a quarter ago.
Apart from deposits, the bank is looking at other sources of funds, Ekambaram said. Today, the bank’s board also approved raising up to 100 bln rupees through the issue of bonds in one or more tranches during 2024-25 (Apr-Mar).
On the bank’s branch network, Ekambaram said that it continues to open up new branches as part of its strategy. She also said that the bank may have opened up nearly 100-150 branches in the current financial year. End
Edited by Deepshikha Bhardwaj
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