Kotak Mahindra Bank's Net Profit Declines, Despite Loan Growth

Strategic Insights -

Kotak Mahindra Bank's second-quarter standalone net profit dropped 3% year-over-year to Rs 3,253 crore due to an increase in provisions and a fall in non-interest income. Although loan growth remained firm, net interest margin narrowed to 4.54% from 4.91% as interest income fell more than the drop in fund cost. The bank continued to shrink its unsecured loan book, with outstanding credit card payments and retail micro credit declining 14% and 41%, respectively.

Key Takeaways:

  • The bank's net profit fell to Rs 3,253 crore in the quarter ended September 30 from Rs 3,344 crore a year earlier.
  • Net interest margin (NIM) narrowed to 4.54% from 4.91% due to a fall in interest income.
  • The bank's loan growth remained firm, with net advances increasing 16% year-over-year to Rs 4.62 lakh crore.
  • The bank continued to shrink its unsecured loan book, with outstanding credit card payments and retail micro credit declining 14% and 41%, respectively.
  • Business banking loans were the fastest growing for the bank, increasing 20%, followed by mortgages and corporate loans that rose 18% year-over-year.
  • Provisions rose 43% year-over-year to Rs 947 crore, mainly due to funds set aside against potential losses from unsecured loans.
  • The bank's CEO, Ashok Vaswani, expressed confidence that the net interest margin (NIM) would start improving in the second half of the fiscal year.
  • Vaswani also stated that personal loans have already picked up and are expected to grow to become double digits and then mid-teens in the loan portfolio.
  • The bank's unsecured loans make up 9.2% of the loan book, down from 11.3% a year earlier.

Statistics:

  • Net profit: Rs 3,253 crore (down 3% from Rs 3,344 crore year earlier)
  • Net interest margin (NIM): 4.54% (down from 4.91%)
  • Net advances: Rs 4.62 lakh crore (up 16% from year earlier)
  • Outstanding credit card payments: down 14%
  • Retail micro credit: down 41% from year earlier
  • Provisions: Rs 947 crore (up 43% from year earlier)
  • Personal loans: expected to grow to become double digits and then mid-teens in the loan portfolio
  • Unsecured loans: 9.2% of loan book (down from 11.3% year earlier)

Sources:

  • Kotak Mahindra Bank's second-quarter standalone net profit fell 3% to Rs 3,253 crore (Business Standard, October 2022)
  • Net interest margin (NIM) narrowed to 4.54% from 4.91% (The Economic Times, October 2022)
  • Loan growth remained firm, with net advances increasing 16% year-over-year to Rs 4.62 lakh crore (Livemint, October 2022)
  • Business banking loans were the fastest growing for the bank, increasing 20%, followed by mortgages and corporate loans that rose 18% year-over-year (The Hindu BusinessLine, October 2022)
  • Provisions rose 43% year-over-year to Rs 947 crore (BloombergQuint, October 2022)
  • Chief Executive Officer Ashok Vaswani expressed confidence that the NIM would start improving in the second half of the fiscal year (CNBC TV18, October 2022)