Kotak Mahindra Bank Q2 results: Net profit up 24%, aided by improved NIMs

The net interest income increased 23% to Rs 6,297 cr from Rs 5,099 cr a year ago

Kotak Mahindra Bank (KMB) on Saturday reported a consolidated net profit of Rs 4,461 crore for the July-September quarter of 2023-24 (Q2FY24) – a growth of 24 per cent over the same period last year.

The bank posted a net profit of Rs 3,608 crore in the same period last year (Q2FY23).

On a standalone basis, the private sector lender reported a net profit of Rs 3,191 crore in Q2FY24, up 24 per cent year-on-year (y-o-y) from Rs 2,581 crore in Q2FY23, aided by an improvement in net interest margins (NIMs).

Its net interest income (NII), the difference between interest earned and interest expended, grew by 23 per cent on a y-o-y basis to Rs 6,297 crore in Q2FY24 as against Rs 5,099 crore for Q2FY23.

The net interest margin (NIM) improved to 5.22 per cent for Q2FY24, up from 5.15 per cent a year ago. Sequentially, the bank's margins moderated from 5.57 per cent in the quarter ended June 2023 (Q1FY24).

Fees and services income expanded by 24 per cent y-o-y to Rs 2,026 crore in Q2FY24 from Rs 1,638 crore in Q2FY23, the bank said in a statement.

The bank's advances increased by 21 per cent y-o-y to Rs 3.57 trillion as of the end of September 2023. Among the biggest segments for the bank, home loans and loans against properties (LAP) pool expanded by 15 per cent y-o-y to Rs 99,100 crore. The corporate loans grew 18 per cent y-o-y to Rs 81,844 crore, and the Consumer Bank WC (Secured) book grew 21 per cent y-o-y to Rs 33,095 crore.

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Among the fastest growth, the credit card book grew by 59 per cent y-o-y to Rs 12,597 crore at the end of September 2023, while Retail Micro Finance grew by 80 per cent y-o-y to Rs 7,987 crore. The share of unsecured retail loans, including retail micro finance in advances, rose to 11 per cent in September 2023 from 8.7 per cent a year ago.

Dipak Gupta, managing director and chief executive of KMB, said there is some increase in delinquencies across some segments (of unsecured loans), particularly small ticket loans. "We have to watch it carefully, but it is not something at this point in time that requires the bank to either put brakes on or start panicking. The delinquencies are still less than pre-Covid levels, which gives some degree of comfort. The bank provides aggressively, much earlier than regulatory requirements are."

The bank has guided to increase the share of unsecured loans on the total book to mid-teen levels.

Deposits grew by 23.3 per cent y-o-y to Rs 4.0 trillion at the end of September 2023. However, the share of low-cost deposits – Current Account and Savings Account (CASA) – declined to 48.3 per cent at the end of September 2023 from 56.2 per cent a year ago and 49.0 per cent in the June 2023 quarter.

There is increased competition for deposits. "The healthy deposits – CASA are more sticky. The term deposits tend to be less sticky," Gupta added.

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The asset quality profile of the bank improved, both y-o-y and sequentially, with the gross non-performing assets (NPA) ratio declining to 1.72 per cent in September 2023 from 2.08 per cent in September 2022 and 1.77 per cent in the June 2023 quarter. The net NPA ratio also declined to 0.37 per cent in September 2023 from 0.55 per cent a year ago and 0.40 per cent in the previous quarter.

The Provision Coverage Ratio (PCR) stood at 79.1 per cent at the end of September 2023, higher than 73.7 per cent in the year-ago period and 78 per cent in the previous quarter.

Its capital adequacy ratio (CAR), at a standalone level, stood at 21.7 per cent at the end of September 2023.

Disclosure: Entities controlled by the Kotak family have a significant holding in Business Standard Pvt Ltd