Kotak Mahindra Bank's Q1 consolidated net profit up 53% to Rs 2,755 cr

Bank's standalone net profit was up 26% YoY, aided by loan growth and lower provisions

Kotak Mahindra Bank on Saturday has reported a consolidated net profit of Rs 2,755 crore for the April-June quarter of 2022-23 (Q1FY23) – a growth of 53 per cent over the same period last year. In the year ago period, the bank had posted a net profit of Rs 1,806 crore.

On a standalone basis, the private sector lender reported a net profit of Rs 2071 crore in Q1FY23, up 26 per cent year-on-year (YoY) from Rs 1,642 crore in Q1FY22, aided by drop in provisions and contingencies, and a healthy growth in net interest income.

The net interest income (NII) has increased to Rs 4,697 crore, up 19 per cent from the year-ago period on the back of 29 per cent YoY rise in customer assets. Net interest margin, a measure of profitability for banks, of the lender stood at 4.92 per cent compared to 4.60 per cent in the same period last year.

“The hardening of interest rates happened. And, half of our book is linked to the repo rate. The repo was raised twice this quarter, which enabled us to pass them over almost immediately," said Jaimin Bhatt, Chief Financial Officer, Kotak Mahindra Bank.

"Over the last two years, a larger portion of the balance sheet was going into treasury assets, which are comparatively low yielding when compared to advances. We have seen the treasury assets shrink and some of that has moved to the advances side, resulting in better NIMs”, he added.

Other income was down around 8 per cent YoY to Rs 1,244 crore during the quarter. The fall in other income can be attributed to the trading and mark-to-mark hit of Rs 857 crore the lender took on its fixed income book (net of OIS) in the June quarter, as compared to Rs 274 crore in the year ago period.

Provisions and contingencies of the lender dropped to Rs 23 crore in Q1FY23 compared to Rs 704 crore in Q1FY22. The bank is holding Covid-19 provisions of Rs 482 crore as of the June quarter (after reversing Rs 65 crore in the quarter) and restructuring provisions of Rs 221 crore, which is 10 per cent higher than regulatory requirement, the bank said in its presentation.

It is holding Covid-19 provisions of Rs 482 crore as of the June quarter and restructuring provisions of Rs 221 crore.

The bank reported an improvement in asset quality with gross non-performing assets (GNPAs) ratio falling by 10 basis points sequentially to 2.24 per cent at the end of Q1FY23. The ratio was 3.56 per cent at the end of Q1FY23..

The net NPA ratio fell by 2 basis points sequentially to 0.62 per cent and 0.66 bps on YoY basis.

Slippages for the quarter were to the tune of Rs 1,435 crore or 0.5 per cent of advances. Of this, Rs 781 crore got upgraded within Q1FY23 itself. Net slippages were Rs 654 crore or 0.2 per cent of advances.

Advances of the lender grew 29 per cent YoY and 3 per cent sequentially to Rs 2.80 trillion, aided by a robust increase in home loans, SME loans, and CV/CE loans, among others. Credit substitutes also increased 31 per cent YoY and 11 per cent sequentially, taking the total customer assets of the bank to Rs 3.04 trillion, up 29 per cent YoY and 4 per cent sequentially.

“The number looks very healthy. The corporate segment has not really grown on a standalone basis unless we add the bond segment part. The commercial segment has grown at a small rate. The real growth has happened on the consumer’s side. In the past, the opportunities to grow were limited and in the last six months, we are seeing growth opportunities which likely to continue”, said Dipak Gupta, Joint Managing Director of the bank.

Commenting on the impressive 77 per cent YoY growth in the unsecured segment, Gupta said, “Growth of 77 per cent is very high and it will progressively come down. It is coming out of a very low base. Unsecured retail had dropped to 5 per cent of our loan book and now it is inching to 7 per cent. It is looking pretty healthy currently”.

On the other hand, deposits of the lender grew 10 per cent YoY and 1.53 per cent sequentially to Rs 3.16 trillion in Q1FY23.

The current account savings account (CASA) ratio stood at 58.1 per cent, lower than 60.2 per cent in the year-ago quarter and 60.7 per cent in the March 2022 quarter.

“The current account growth is actually negative in this quarter. What happens is the current accounts keep building up in Q4 and reaches its peak closer to March-end. And, thereafter, corporates withdraw a lot of their current account and put it to productive uses. That is the reason CASA ratio has fallen. From our side, we would like it to be as high as possible”, Gupta added.

Capital adequacy ratio of the bank as of June 30, 2022 was 22.1 per cent and CET I ratio was 21 per cent.

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