Kotak Q3 net profit rises 6.75% to Rs 4,265 cr; bank flags deposits as a challenge

Mumbai: Kotak Mahindra Bank on Saturday reported a 6.75 per cent growth in consolidated net profit to Rs 4,264.78 crore for the December quarter.

On a standalone basis, the private sector lender's post-tax profit rose to Rs 3,005.01 crore from Rs 2,791.88 crore in the year-ago period but was lower than the preceding September quarter's Rs 3,190.97 crore.

The bank's newly appointed Managing Director and Chief Executive Ashok Vaswani said the bank is in great shape, but the challenge before him now is to identify the particular area that can help it grow faster and make the bank's size bigger.

The lender posted about 16 per cent increase in net interest income to Rs 6,554 crore on the back of a 19 per cent growth in advances, while net interest margins were down from last year's 5.47 per cent to 5.22 per cent -- the same as the preceding September quarter.

Its other income grew to Rs 2,297 crore from the year-ago period's Rs 1,948 crore.

The bank notched up a deposit growth of over 18 per cent.

The share of the low-cost current and savings account deposits fell to over 47 per cent, as more customers chased the higher-yielding term deposits in the high interest rates regime. In an investor presentation, the bank flagged deposits as a "challenge".

Its whole-time director Shanti Ekambaram said the bank is focusing on granular growth in the deposit base and was also looking at other alternatives of raising the required resources for funding the higher credit growth.

The credit-deposit ratio has gone up to 88 per cent and bank executives said attempts will be made to reduce the same.

The overall provisions jumped to Rs 579.14 crore for the reporting quarter from Rs 148.83 crore in the year-ago period, which seemed to have impacted profit growth.

The bank said the money set aside during the reporting quarter includes Rs 190.13 crore towards investments in Alternative Investment Funds (AIFs) following the Reserve Bank of India's (RBI) guidelines.

The bank's Chief Financial Officer Jaimin Bhatt said the bank has more exposure to the AIF category but has made provisions only against the categories where required.

Maintaining that none of its exposure can be termed as helping in evergreening, Bhatt said the bank will continue to look at the AIF investments as a business area.

The fresh slippages increased to Rs 1,177 crore as against Rs 748 crore in the quarter-ago period, and its whole-time director K V S Manian said a large extent of the additions were due to unsecured lending.

Share of unsecured advances "where the RBI has concerns at a systemic level" has gone up to over 11 per cent, but Ekambaram said the growth is as per its strategy to take the share to mid-teens and the bank will continue on the same path.

She said the unsecured portfolio stress is stable and manageable, and the bank has no plans to put brakes on this business.

The gross non-performing assets ratio for the lender was stable at 1.73 per cent as against the last disclosed 1.72 per cent in September 2023.

The credit growth to the corporate segment slowed down to 13 per cent.

On private capital expenditure, he said there is not enough momentum as yet.

Its overall capital adequacy stood at a healthy 19 per cent, down from 20.03 per cent three months ago, possibly due to changes in risk weights advised by the RBI on the exposures to non-bank lenders and unsecured loans.

The bank board on Saturday approved raising up to Rs 10,000 crore through debenture issue.

Vaswani, who joined the bank after working for global lenders like Barclays, said the bank is in "great shape" generally but declined to spell out specifics of his strategy, saying it has been only 17 days since he joined.

He said the challenge the way he sees is in "scaling for relevance" where it will have to choose the right area where it can go disproportionately, and added that his forte of digitisation and technology will also be a focus area.