On a standalone level, which represents the banking operations, the lender reported a 31 per cent jump in net profit in Q3FY23 to Rs 2,792 crore, beating street estimates. Analysts polled by Bloomberg had estimated a net profit of Rs 2,611 crore for the quarter. The rise in profit after tax (PAT) was aided by higher net interest income (NII) because of robust growth in advances.
NII, which is the total interest income minus interest expenses, of the lender was up 30 per cent YoY to Rs 5,653 crore in the quarter as advances rose by over 23 per cent. Its net interest margin (NIM) stood at 5.47 per cent, compared to 4.62 per cent in the year-ago period.
Asset quality of the lender saw further improvement, with the gross non-performing assets (NPAs) ratio at 1.90 per cent at the end of December 2022 quarter, down 18 basis points (bps) sequentially. Net NPAs ratio stood at 0.43 per cent, down 12 bps during the same period. Meanwhile, slippages for the quarter stood at Rs 748 crore, down 24 per cent from the previous quarter.
Credit cost on advances for Q3FY23 was 27 bps (on an annualised basis), compared to 26 bps in the previous quarter and 33 bps in the year ago quarter.
For Q3, provisions for bad loans stood at Rs 149 crore, marginally higher than Rs 137 crore in the previous quarter. At the end of December quarter, the bank is holding Covid-related provisions to the tune of Rs 400 crore. At the end of Q3 FY23, the provision coverage ratio (PCR; excluding standard and covid provisions) stood at 77.6 per cent, higher than 73.7 per cent in the previous quarter and 71.3 per cent in the year-ago period.
Further, in accordance with Covid Resolution Framework announced by the Reserve Bank of India (RBI), the bank has standard restructured fund-based outstanding of Rs 281 crore. Also, under the MSME Resolution Framework, it has a standard restructured fund-based outstanding of Rs 484 crore.
Advances of the lender grew 23 per cent YoY and 6 per cent sequentially to Rs 3.11 trillion, driven by robust growth in home loans. The corporate banking segment grew 7 per cent sequentially and 2 per cent YoY to Rs 69,987 crore during this period.
Total customer assets, which comprise advances and credit substitutes, increased by 24 per cent YoY and 6 per cent sequentially to Rs 3.39 trillion in Q3FY23.
On the other hand, deposits grew by 12.9 per cent YoY and 6 per cent sequentially to Rs 3.45 trillion in the December quarter. The share of low cost deposits – current account & savings account (CASA) – was down at 53.3 per cent, compared to 56.2 per cent in the previous quarter, and 59.9 per cent in the year ago period.
“The way things are right now, about 55 per cent of our asset book is linked to external benchmark lending rate (EBLR), and another 15 per cent is linked to other floating rates. All of these get repriced so as long as we are seeing interest rate picking up, we will see some increase in NIM '', said Jaimin Bhatt, Group President & Group Chief Financial Officer, Kotak Mahindra Bank.
“Some of the NIM increase is an immediate impact of the ability to pass on rate hikes. We expect further increase in NIMs because of the past rate hikes. But, progressively as the borrowing cost move up, so some of the gains on the NIM side will go off”, said Dipak Gupta, Joint Managing Director, Kotak Mahindra Bank.
Disclosure: Entities controlled by the Kotak family have a significant holding in Business Standard Pvt Ltd
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