Kotak Mahindra Bank’s net profit fell nearly 3% on year to Rs 3,253.33 crore for the quarter ended September, which is a tad lower than analyst estimate of Rs 3,345 crore. The fall in the bottom line is due to higher provisions on a year-on-year basis.
The provisions and contingencies of the bank were up 43.5% on year to Rs 947 crore. However, on a sequential basis, the provisions declined by 22%. The provision coverage ratio stood at 77%.
Net interest income was up 4% on year to Rs 7,311 crore for the quarter, which is lower than market expectation of Rs 7,357 crore, according to Bloomberg estimates.
The net interest margins moderated to 4.54% from 4.65% a quarter ago. Other income was down 3.5% on year and nearly 16% on quarter. If there are no further rate cuts, the net interest margins are likely to inch up gradually in the next two quarters, the bank’s management said in the post earnings media call.
In terms of the bank’s balance sheet, net advances rose 16% on year while deposits were up by 14.5% as on September 30. Cost of funds fell to 4.70% from 5.15% a year ago.
Within advances, consumer banking book grew by 16% on year, while the commercial banking book was up 5%. Corporate banking increased by 18% on year as on September end. While segments such as home loans, business banking assets, personal loans and consumer durables saw growth on a year-on-year basis, credit card book fell by 14% on year and 4% on quarter.
“We are working very hard on the credit card book. In the end of September, the credit card spends picked up nicely and we are hoping to build on that momentum. Let’s see how it plays out into Q3,” Ashok Vaswani, MD and CEO, said in the post earnings media call.
Retail micro-credit book fell 41% on year to Rs 5,725 crore. According to the investor presentation, the share of unsecured retail advances to net advances reduced to 9.2% as on September 30 from 11.3% a year ago. The management said they plan to increase the share of unsecured retail to double digits and later on in the mid-teens going forward.
Under deposits, current account and savings account (CASA) deposits increased 11.18% on year with the CASA ratio at 42.3% as on September 30. With this, the credit-to-deposit ratio stood at 87.5%, as on September 30. Basel-III capital adequacy ratio stood at 22.05% as on September 30.
In terms of asset quality, the gross non-performing asset (NPA) ratio and the net NPA ratio improved by 6 basis points on a sequential basis to 1.39% and 0.32%, respectively, as on September 30. The bank also saw lower fresh slippages in the reporting quarter, with the slippage ratio at 1.41% lower than 1.88% as reported a quarter ago.
The management said while the slippages have come down in the microfinance and the credit card segments, they are cautious about the stress in the retail commercial vehicle space.
The annualised credit cost fell to 0.79% in July-September from 0.93% a quarter ago. The bank expects the credit cost to decline further in the next two quarters. “With a gradual reduction in credit cost and gradual increase in the net interest margins, one would see an uptick in the bank’s performance,” Devang Gheewalla, Group Chief Financial Officer, said in the post earnings media call.
On acquiring stake in IDBI Bank, Vaswani said they are looking at every opportunity along the away. “It is premature to talk on or about any deals that we could be looking at,” he added. On Friday, shares of Kotak Mahindra Bank closed 1.5% lower Rs 2,192.50 on NSE.
RBI OKs reappointment of CS Ranjan as part-time chairman
RBI has approved the reappointment of C S Rajan, independent director on the board of Kotak Mahindra Bank, as part-time chairman for a further period from January 1, 2026 to October 21, 2027, the bank said in a press release. He has been serving as part-time chairman since January 1, 2024, following RBI’s earlier approval for a two-year term.