Kotak Mahindra Bank Q2 Results: Net Profit Rises 27%, Beats Estimates

Private sector lender Kotak Mahindra Bank saw its July-September net profit rise on higher core income and lower provisions.

The bank's net profit for the quarter stood at Rs 2,580.68 crore, up 27% year-on-year. Analysts polled by Bloomberg estimated a Rs 2,429.6 crore net profit for the three months.

Net interest income, or core income, for the bank rose 26% from a year ago and stood at Rs 5,099 crore. Other income too rose by about 8% year-on-year to Rs 1,954 crore.

Kotak Mahindra Bank also reported a slight decline in its CASA ratio which stood at 56.2% as opposed to 60.6% for the second quarter of the previous financial year.

"In the short run, so what happens is you [current accounts] and [savings accounts] cannot grow at the same pace as probably your assets are expected to grow," Dipak Gupta, joint managing director at Kotak said during a press conference on Saturday. Hence, banks have to turn to turn to term deposits to fill the gap in the short run, he added.

Kotak's term deposits grew by 20% year-on-year in the second quarter of financial year 2023. While deposit associated costs may go up in the short run, CASA will start picking up later on and lead to a normalisation of the costs, Gupta said. "What we're finding really is—which is really reflected in the [net interest margins] is that yes in the short term it is possible to pass on these costs," he added.

Overall, there's a 30 basis point differential in the Kotak Mahindra bank's costs of funds as compared to the same quarter last year, Gupta said.

Gross non-performing asset ratio for the bank fell by 16 basis points sequentially to 2.08%. Similarly, net NPA improved to 0.55% as of September 30, compared with 0.62% as of June 30.

Provisions for the quarter fell 67% year-on-year to Rs 137 crore.

Business Growth

Deposits at Kotak Mahindra Bank rose by 11.4% year-on-year and stood at Rs 3.25 lakh crore at the end of the second quarter. The bank's advances also grew by 25% during the same time period and stood at Rs 2.94 lakh crore for the quarter ended September.

Kotak Mahindra Bank's credit card book grew by 81% on a yearly basis and had an asset size of Rs 7,903 crore in the quarter.

Home loans and loans against property grew by 80% year-on-year to Rs 85,843 crore in the second quarter. Corporate banking stayed flat year-on-year and actually saw a contraction of 0.2% on a sequential basis.

"The corporate book on its own, you may not see a large number but added together with the credit substitutes, the corporate book has grown about 16% year-on-year," Jaimin Bhatt, chief financial officer at Kotak Mahindra Bank, said during the press conference.