Kotak Mahindra Bank’s standalone net profit for the quarter ended December was up 4% year-on-year to Rs 3,446 crore on the back of higher income and improvement in asset quality. The analysts had pegged the net profit at Rs 3,536 crore.
The net interest income (NII) was up 5% y-o-y to Rs 7,565 crore and the other income inched up by over 8% y-o-y to Rs 2,838 crore. The operating expenditure increased by 8% y-o-y to Rs 5,023 crore, due to rise in employee costs, as it includes an incremental cost of Rs 96 crore for the implementation of the new labour code laws.
Despite the cost of funds improving, the net interest margins were stable on a sequential basis at 4.54%. The bank’s management, in the post earnings call, said that the decline in cost of funds was due to the reduction of high yielding deposits.
“This decline in cost of funds has helped the NIMs to remain stable and we expect them to be on the higher side in Q4, considering that there are no rate cuts,” Devang Gheewalla, group chief financial officer at Kotak Mahindra Bank, said.
Loans and deposits of the bank were up 15% y-o-y as on December 31. The credit-deposit (CD) ratio of the bank stood at 88.6%.
Managing Margins
On the CD ratio being on the higher end, the bank’s MD and CEO Ashok Vaswani said that they are comfortable with the ratio being in the range of 85-88%.
Within advances, consumer bank book grew 16% y-o-y, commercial banking was up 7% and wholesale banking grew 17% on year.
Credit Card Recovery
Since February, when the Reserve Bank of India (RBI) lifted the ban on Kotak Bank to issue credit cards, the bank has been struggling to grow the book. The credit card book declined by 1% quarter-on-quarter and 11% y-o-y as on December 31.
“We have completely revamped our product set and these cards have landed well in the market. From here onwards, we will be accelerating the issuance and spends on cards,” Vaswani said. “We should be seeing traction in this segment in a couple of quarters,” he added.
The share of unsecured retail advances to net advances fell to 8.9% during the quarter from 10.5%. The total small and micro enterprise (SME) advances, which include business banking, agriculture finance and corporate, were up 17% y-o-y to Rs 1.16 lakh crore.
Out of the total deposits, the current account and savings account (CASA) deposits were up nearly 12% y-o-y to Rs 2.24 lakh crore. The CASA ratio declined to 41.3% by the end of December from 42.3% a quarter ago.
Provisions and contingencies of the bank were up around 2% on year to Rs 810 crore. However, on a sequential basis, they fell by 14.5%.
The asset quality ratios of the bank too improved on a sequential basis. The gross non-performing asset (NPA) ratio stood at 1.30% during the quarter as against 1.39% a quarter ago and the net NPA ratio improved marginally to 0.31%. The provision coverage ratio as on December 31 stood at 76%. Average liquidity coverage ratio stood at 135% for the quarter under consideration.
The bank saw fresh slippages of Rs 1,605 crore, lower than Rs 1,629 crore seen a quarter ago. Around Rs 257 crore of fresh slippages were upgraded within the same quarter, the bank said in the investor presentation. The slippages were largely from the unsecured credit card segment, personal loans and microfinance segments. The bank continues to remain cautious on the retail commercial vehicle segment. Total upgrades and recoveries during the quarter stood at Rs 778 crore, higher than Rs 688 crore seen a quarter ago.
On Saturday, the bank approved a fundraise of up to Rs 15,000 crore through non-convertible debentures (NCDs) in one or more tranches in 2026-27 (Apr-Mar). The Basel-III capital adequacy ratio stood at 22.63% for the quarter.