Kotak Mahindra Bank Ltd. is expected to report a 21% rise in standalone net profit for the June quarter, helped by lower provisions even as net interest margins are seen narrowing from the previous quarter.
Investors will closely watch whether steady loan growth and improving asset quality can offset pressure on profitability from higher funding costs.
Kotak Mahindra Bank Q1 Preview - Bloomberg Estimates (Standalone, YoY)
Net interest income seen 10.2% higher at Rs 8,001.53 crore versus Rs 7,259.29 crore
Net interest margin seen at 4.5% versus 4.65% (4.67% QoQ)
Provisions seen 38.5% lower at Rs 741.8 crore versus Rs 1,207.76 crore
Net profit seen 21% higher at Rs 3,975 crore versus Rs 3,282 crore
Gross NPA seen at 1.18% versus 1.2% a year ago
The key issue this quarter is whether Kotak Mahindra Bank can sustain profitability as net interest margins moderate. Analysts broadly expect loan growth to remain healthy across retail, SME and corporate segments, but the impact of higher funding costs and deposit mix on margins will be closely tracked. Investors will also assess whether improving asset quality and lower credit costs provide enough support to earnings.
Here's what analysts expect from Kotak Mahindra Bank Q1 results
Motilal Oswal
- Expects NIM to decline by around 14 basis points sequentially to 4.53% after an elevated March quarter.
- Sees a slight increase in credit costs, partly offset by easing stress in the microfinance and credit card portfolios.
- Forecasts loan and deposit growth of 3.5% and 2.9% quarter-on-quarter, supported by retail, SME, corporate lending and a recovery in unsecured loans.
- Expects operating expense growth to remain contained, keeping the cost-to-income ratio around 46%.
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DAM Capital
- Expects NIM pressure of around 7-8 basis points quarter-on-quarter due to sticky funding costs.
- Says lower interest reversals could partly cushion the impact on margins.
- Forecasts sequential loan growth of 3-4%, potentially stronger than peers.
- Expects provisions to increase from the previous quarter because of seasonal factors.
Kotak Institutional Equities
- Expects around 16% year-on-year credit growth, led by mortgages, consumer banking, SME and microfinance, with unsecured retail lending recovering.
- Sees corporate banking gaining momentum as pricing spreads improve.
- Forecasts reported NIM at 4.54% after the elevated March-quarter base.
- Expects slippages to remain below 1.2%, supported by better performance across retail portfolios.
- Sees credit costs staying below 60 basis points.
- Expects operating expenses to grow at a controlled mid-single-digit pace as technology and automation improve efficiency.
ALSO READ: Banks Q1 Preview: Private Banks Lead Analysts' Top Picks; NIM Pressure Seen To Offset Healthy Loan Growth
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