Kotak Bank Q4 Preview: Strong Loan Growth To Aid NIM, But Provisions Seen Higher

Kotak Mahindra Bank is expected to post a strong performance for the quarter ended March, led by healthy credit growth from the strategic acquisition of Standard Chartered's personal loan portfolio, which will also aid profitability. However, higher provisions could cap profit after tax.

According to a poll by Bloomberg, the private sector bank is likely to report standalone profit after tax of Rs 3,606 crore, down by 13% on year. The bank's bottom bottomline was Rs 3,305 crore a quarter ago.

"In our base case scenario, we assume higher provisions on a YoY basis, given the low base of the previous year. As a result, PAT is expected to decline by 14.1% YoY, reflecting the impact of elevated provisioning expenses. However, on a sequential basis, Profit is expected to grow by 7.4% QoQ," brokerage Deven Choksey Research said in a preview note.

Kotak Mahindra Bank is poised to see solid loan growth and a positive impact on margins from the acquisition of Standard Chartered's personal loan portfolio. This will aid net interest margins, which are likely to be higher than those of peers, as the company benefits from a slash in savings account rates, Elara Securities said.

Loan growth is expected to improve following the removal of the Reserve Bank of India's restrictions on onboarding new customers and issuing fresh credit cards. This is expected to drive a healthy pickup in retail and unsecured credit loans.

• Net profit seen down 13% at Rs 3,606 crore.

• NII seen falling 6% to Rs 7,347 crore.

• NIM seen down by 41 basis points YoY and 6 basis points at 4.87%

Net interest income of the bank is expected to decrease by 6% year on year to Rs 7,347 crore, analysts polled by Bloomberg showed. Consequently, NIM is seen at 4.87%, a tad down from 4.93% a quarter ago.

On the asset quality front, analysts have mixed views. Most expect it to remain largely stable with slippages seen flat on a sequential basis due to easing stress in the personal loan portfolio. However, there may be slight seasonal increases in provisions.

"The bank will likely see better print on asset quality with variance at play on microfinance institutions and unsecured portfolios," Elara Securities said.

Meanwhile, fee income growth is expected to roughly align with loan growth, while operating expenses will likely grow at a slower pace than business expansion, keeping cost ratios broadly stable.

Overall, business growth is expected to remain healthy. Investors will watch out for the management's commentary on the bank's technology spends, sustained growth, and unsecured portfolio.