Kotak Mahindra Bank’s consolidated net profit rises 20.7% in Q2FY23

Private sector lender Kotak Mahindra Bank reported a 20.7 per cent jump in its consolidated net profit to Rs 3,608.18 crore in the July – September quarter (Q2) of FY23, compared to Rs 2,988.74 crore in the year-ago period.

On a standalone basis, the bank’s net profit was up 27 per cent year-on-year (YoY) to Rs 2,581.68 crore in Q2FY23, aided by lower provisions and a robust jump in net interest income (NII), which in turn was on the back of healthy growth in advances.

NII of the lender grew 26.8 per cent YoY to Rs 5,099 crore during this period and net interest margin, a measure of profitability of banks, stood at 5.17 per cent. In the year-ago period, the bank reported a NIM of 4.45 per cent.

Provisions and contingencies fell sharply during the period under review to Rs 137 crore compared to Rs 424 crore in the year-ago period. The bank has written back Covid provisions to the tune of Rs 44 crore during the quarter (nil write-back in the year-ago period), but continues to hold Rs 438 crore as provisions as of September 30, 2022.

Asset quality of the lender saw a sharp improvement as gross non-performing asset (GNPA) ratio declined by 111 basis points (bps) on a YoY basis and 16 bps sequentially to 2.08 per cent at the end of September 2022 quarter. Similarly, net NPAs declined 51 bps on a YoY basis and 7 bps sequentially to 0.55 per cent. The provision coverage ratio (excluding standard and covid provisions) or PCR increased to 73.7 per cent in Q2FY23, from 67.5 per cent a year ago and 72.6 per cent in the previous quarter.

The bank saw slippages to the tune of Rs 983 crore in Q2FY23, of which Rs 330 crore got upgraded within the quarter. Hence, net slippages were to the tune of Rs 653 crore or 0.2 per cent of advances.

Advances of the lender grew 25.14 per cent YoY and 4.94 per cent sequentially to Rs 2.94 trillion. The home loan and loan against property segment of the bank grew 40 per cent YoY and 6 per cent sequentially to Rs 85,843 crore. Its consumer banking, credit card, CV/CE, agriculture, and SME portfolio grew in double digits (between 19-82 per cent) on a YoY basis. However, its corporate banking portfolio at Rs 65,524 crore was relatively flat during this period compared to the year ago period’s Rs 65,357 crore, and was about 2 per cent lower from Rs 66,633 crore in the previous quarter.

“While the interest costs have moved up, the ability to pass on the corporate side has been lesser, so to that extent there is slightly muted growth. But from the demand perspective, it is sufficient. The demand from the larger corporates is more in the form of substitutes these days”, said Dipak Gupta, Joint Managing Director, Kotak Mahindra Bank.

Total consumer assets, which includes credit substitutes, grew 25 per cent YoY and 6 per cent sequentially to Rs 3.21 trillion.

Deposits, on the other hand, grew 11.48 per cent YoY and 2.76 per cent sequentially to Rs 3.25 trillion. The bank’s CASA ratio stood at 56.2 per cent as of September 30, 2022, down from 60.6 per cent in the year-ago quarter and 58.1 per cent in the June quarter.

We have more capital than what we need immediately. We raised capital at the beginning of Covid…the growth thereafter slowed down. Since there is growth happening in the economy, and since we have enough capital, we have stepped up our growth on the advances side. The balance sheet has been growing in a healthy manner over the last several quarters and we will continue to do that. Also, we will keep looking for any opportunity that may come around the in-organic side in any of the areas which we operate in,” said Jaimin Bhatt, Group CFO, Kotak Mahindra Bank.

Capital adequacy ratio of the bank, as per Basel III, as at September 30, 2022 was 22.6 per cent and CET I ratio stood at 21.5 per cent.

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