Kotak Mahindra Bank’s standalone profit rose 5% to Rs 3,344 crore in the second quarter of current fiscal from Rs 3,191 crore in the same quarter previous year, helped by healthy growth in net interest income and improvement in asset quality.
The net profit was below expectations as Bloomberg analysts expected the lender to post Rs 3,424 crore net profit in the second quarter.
Despite higher provisions, the bank’s net interest income rose 11% to Rs 7,020 crore. Meanwhile, provisions for the quarter were at Rs 660 crore, up 80%.
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At the same time, the net interest margin (NIM) of the private sector lender compressed to 4.91% from 5.22% a year ago.
Addressing the reason behind the fall in NIM, Devang Gheewalla, the group chief financial officer at the Kotak Mahindra Bank said in the post result virtual conference, “So far this quarter, our NIM has fallen 11 basis points (bps) mainly because of slowdown in unsecured business due to the embargo. This has affected our earnings on assets, thereby impacting the NIM.”
Due to the Reserve Bank of India’s embargo, the bank’s credit card book has not experienced growth. Management indicated that 30-40% of slippage in Q2 FY25 originated from credit cards. They also expressed interest in pursuing more inorganic acquisitions to expand their customer base, provided these opportunities align with their criteria.
The bank’s advances increased 17% year-on year to Rs 4.2 lakh crore as on September 30. Unsecured retail advances as a percentage of net advances were 11.3%. Total deposits rose 16% to Rs 4.46 lakh crore. The current account-savings account ratio was 43.6% at the end of September against 43.4% a quarter ago.
Kotak Mahindra Bank’s customer assets, including advances and credit substitutes, grew 18% to Rs 4.5 lakh crore, showed the bank’s investor presentation. Secured loans like home loans and business banking loans grew steadily, with home loans increasing by 18% and business banking advances up by 21%.
On the other hand, the proportion of unsecured retail advances, which includes personal loans and credit cards, stood at 11.3% of total advances, a slight decrease from 11.6% in the previous quarter.
Meanwhile, the bank’s management has highlighted a slowdown in the rural segment, which is reflected in commercial vehicle, tractor loans, and microfinance initiatives. Additionally, the bank is observing some overleveraged among customers, particularly in credit cards and personal loans.
On deposit refinancing, deputy managing director, Shanti Ekambaram said that the deposit rates are in alignment with the industry rates, and they will continue to do so.
In terms of asset quality, the gross non-performing asset ratio (GNPA) fell to 1.49% from 1.72% a year ago, at the same time net NPA rose to 0.43% from 0.37%. Since the embargo, the bank has been facing stress in the category of unsecured loans, which has significantly led to rise in net NPA ratio and provisions, said the bank’s management.
As on September 30, capital adequacy ratio of the bank was 22.6% and CET1 ratio was 21.5%. Standalone return on assets for the reporting quarter was 2.17%.
On a consolidated basis, the bank logged a growth of 13% in net profit to Rs 5,044 crore as against Rs 4,461 crore in Q2FY24.
At the consolidated level, Return on Assets (ROA) for Q2FY25 was 2.53% as compared to 2.68% for Q2FY24.
The total assets under management as of September-end were Rs 680,838 crore up 37% YoY over Rs 498,342 crore in Q2 of FY24.
On October 18, Kotak Mahindra Bank said that they would acquire the personal loan book of Standard Chartered Bank India, which has a total outstanding of around Rs 4,100 crore, in an effort to expand its retail lending business. This comes at a time when the central bank has been vigilant about the rise in retail loans in unsecured segments.
The bank’s management has clarified that they have taken due diligence, and acquiring the personal loan book of Standard Chartered India, will give them access to ample growth.
From: financialexpress
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