Kotak Mahindra Bank Q2 Results: A Mixed Bag for Investors
Kotak Mahindra Bank’s net interest income or NII for the second quarter grew by 4% year-over-year, rising to Rs 7,311 crore from Rs 7,020 crore in the same period last year. This growth in NII can be attributed to the bank’s strong asset quality and its ability to maintain a healthy net interest margin.
The bank’s operating profit also saw a modest increase of 3.3%, reaching Rs 5,268 crore compared to Rs 5,099 crore previously. However, the bank’s provisions saw a sharp increase, jumping by 43.5% year-on-year to Rs 947 crore from Rs 660 crore. This increase in provisions was largely due to the bank’s efforts to strengthen its balance sheet and prepare for any potential loan losses.
Impact of Higher Provisioning on Net Profit
Consequently, the bank reported a Net Profit of Rs 3,253 crore, which was a decline of 2.7% compared to Rs 3,344 crore in the year-ago quarter. This decline in net profit can be attributed to the higher provisioning made by the bank during the quarter. Despite this, the bank’s return on assets (ROA) and return on equity (ROE) remain strong, indicating the bank’s ability to generate profits from its assets and equity.
Deposit Growth and Asset Quality
The bank’s total deposits increased by 14.5% to stand at Rs 5.28 lakh crore. The CASA or the Current Account Savings Account ratio for the quarter was 42.3%. This showed a growth compared to 40.9% in the preceding quarter. The bank’s low-cost deposits continue to be a strength, with CASA deposits constituting a significant portion of the bank’s total deposits.
In terms of asset quality, the bank showed improvement quarter-over-quarter. The bank’s reported Gross NPA decreased to 1.39% from 1.48%, and the Net NPA improved to 0.32% from 0.34% during the second quarter. Fresh slippages during the quarter were Rs 1,629 crore, compared with Rs 1,812 crore in June. Recoveries and upgrades were at Rs 688 crore in the second quarter, up 25% quarter-on-quarter.
Loan Growth and Segment Performance
Supporting its balance sheet growth, the bank’s Net Advances grew by 16% year on year to Rs 4.63 lakh crore, while Total Deposits increased by 14% year on year to Rs 5.28 lakh crore. Among loan products, the credit card portfolio declined 14% year-on-year to Rs 12,444 crore. Retail microcredit too dipped 41% from a year ago to Rs 5,725 crore. The bank’s home loan and loans against property business rose 18% year-on-year to Rs 1.38 lakh crore. Corporate banking loans also rose 18% to Rs 1.09 lakh crore. Business banking assets were up 20% from last year to Rs 47,825 crore.
The bank’s strong performance in the home loan and corporate banking segments is a positive sign, indicating the bank’s ability to tap into the growing demand for home loans and corporate banking services.
Conclusion
In conclusion, Kotak Mahindra Bank’s Q2 results show a mixed performance, with growth in NII and operating profit, but a decline in net profit due to higher provisioning. The bank’s strong asset quality, low-cost deposits, and growing loan book are positives, but the bank needs to be cautious about the increasing provisions and their impact on profitability. Investors should keep a close eye on the bank’s performance in the coming quarters to see how it navigates the challenges in the banking sector.
