Kotak Mahindra Bank Q1 Results: Net income jumps 67% to Rs 3,452 crore in June quarter

Kotak Mahindra Bank Q1 Results: Fourth largest private sector lender Kotak Mahindra Bank on Saturday reported a massive 67 per cent on-year jump in standalone net income at Rs 3,452 crore for the June quarter, buoyed by an overall improvement in performance especially on the margins side that scaled to near peak.

On a consolidated level, profit, which includes net gains from its subsidiaries in the brokerage/i-banking, ARC, wealth management, insurance businesses and microfinance and NBFC, grew 51 per cent to Rs 4,150 crore, the city-based lender said in a statement.

The key net interest income increased 33 per cent to Rs 6,234 crore driven by a 5.57 per cent higher net interest margin, which is near its peak, for the reporting quarter as the bank passed on the entire 250 basis points hike by the central bank to its customers while did not reprice the deposits proportionately.

But its deputy managing director Dipak Gupta, during the earnings call, guided towards lower margins as the bank will have to reprice deposits again and pegged 5.25 per cent as a reasonable margin for the full year.

Fees and services income rose 20 per cent to Rs 1,827 crore and the Casa ratio stood at 49 per cent.

Of this, the biggest contributor was the market gains of Rs 240 crore as against a net loss of Rs 850 crore in the 12 trailing months, Jaimin Bhatt, the group president and chief financial officer, told reporters.

Advances increased 19 per cent to Rs 3,37,031 crore, with customer assets, comprising advances and credit substitutes, rising 18 per cent to Rs 3,62,204 crore from Rs 3,06,123 crore in June 2022.

Unsecured retail advances, including retail microfinance, climbed 10.7 per cent of advances from 7.9 per cent.

Gupta said despite some level of stress in the book led by credit cards, which have seen an industry-wide spike in delinquencies, can still offer a fair level of risk-adjusted return and that the entire portfolio can go up to mid-teens, which means the book can grow up to 15 per cent or so.

"There is some stress, I have to admit but that does not call for any action. Of course, we will not wait till a large pool of our unsecured assets to turn dud to act. We will act in time, for sure. But as of now, we're very comfortable with the way the portfolio is performing from a risk-adjusted returns perspective," both Gupta and Bhatt vouched.

The bank's credit outstanding is around Rs 11,360 crore, Bhatt said and that is almost 3 per cent of the unsecured book, refusing to quantify who of that is already stressed.

Gross NPAs declined 1.77 per cent to Rs 6,587.43 crore from Rs 7,223.54 crore and when it was 2.24 per cent and the net NPAs fell to 0.40 per cent or Rs 1,579.62 crore from 0.62 per cent or Rs 2,143.06 crore, and the provision coverage ratio stood at 78 per cent.

The bank has fresh slippages of Rs 1,205 crore but there was so immediate recoveries/regularisation of around Rs 300 crore so net slippage is only around Rs 900 crore, Bhatt said.

Bhatt said that most of the slippages came in from retail and tractor books.

This had the provisions and contingencies nearly doubling to Rs 413.78 crore from 148.34 crore.

Interest cost rose to Rs 4,834.08 crore from Rs 4,229.65 crore and the overall operating expenses rose almost doubled to Rs 9,889.62 crore from Rs 4,870.12 crore of which employees cost rose to Rs 2,434.06 crore from Rs 1,839.09 crore, primarily due to the increase in pension cost.

He sounded confident about managing the high attrition level, saying the churn is more in the lower and middle level (20 per cent) while the senior level churn is manageable at about 10 per cent.

At the lower level it is really high, Gupta said but did not quantify it.

On the Expected Credit Loss (ECL) provision, Bhatt said it will be much lower than the industry average as our current provisions are much higher than needed and overall it will be a couple of 100 crores more.

On the tepid growth in the corporate loan book, Gupta said there is nothing that needs special attention as Q1 is normally a slack season but of course, we want to grow this book much larger.

The bank, which is known for its very high Casa levels, saw a decline in the same which Gupta attributed to the hardening 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.

The capital adequacy ratio under Basel III stood at 23.3 per cent of which and CET 1 ratio at 22.3 per cent and the consolidated capital and reserves and surplus stood at Rs 1,16,500 crore from Rs 1,00,078 crore in June 2022.

Consolidated customer assets which comprises advances and credit substitutes grew 19 per cent 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 per cent from Rs 3,78,474 crore in June 2022 and the alternate assets AUM increased 90 per cent to Rs 46,443 crore.