Kotak Mahindra Bank Q3 Results: Profit Up 10% But Provisions Rise

Steady growth in net interest income lifted Kotak Mahindra Bank Ltd.'s standalone net profit by 10% year-on-year to Rs 3,305 crore in the quarter ended Dec. 31, 2024, slightly below the consensus estimate of Rs 3,338 crore of analysts tracked by Bloomberg.

The profit rise was limited due to a sharp climb in provisions, which rose 37% on-year to Rs 794.1 crore during the quarter.

The net interest income rose 10% year-on-year to Rs 7,196 crore. A slight rise in the net interest margins also aided the bank's performance. The NIMs stood at 4.93% as of December-end, higher than 4.91% a quarter ago, but lower than 5.22% a year ago.

The improvement in the NIMs was because of an increase in current accounts and a rate cut in savings account, leading to sustainable benefit on the NIMs, said Group Chief Financial Officer Devang Gheewalla in a post-earnings call.

The private sector bank's asset quality was largely stable, with the gross non-performing assets ratio marginally rising to 1.5% as of Dec. 31, compared to 1.49% in the previous quarter. The net NPA ratio fell to 0.41% from 0.43% in the prior quarter.

Total deposits rose 15% on year to Rs 4.73 lakh crore. "We are growing savings and deposits in a granular manner and current account, we continue to benefit from IPO flows... but we have granular strategy in place," Deputy Managing Director Shanti Ekambaram said.

The current account-savings account ratio was 42.3% at the end of December, against 43.6% a quarter ago and 47.7% a year ago.

"While the CASA ratio does show a decrease, but when you combine it with the money that has been shifted from savings account to term deposits account, it is quite comfortable amid improvement in current account balances," Gheewalla said.

Fresh slippages fell to Rs 1,657 crore from Rs 1,875 crore a quarter ago, but was up from Rs 1,177 a year ago. "This reduction was because of tractor finance and personal loan businesses as we are seeing improvement in credit quality," Gheewalla said.

Retail microcredit continues to show high slippages during the quarter but the bank expects to see normalisation in the next couple of quarters, Gheewalla said.

"The rate of deterioration has come down significantly and that's why it gives us the comfort that in the next two–three quarters, the stress in MFI business will plateau and start coming down," Managing Director and Chief Executive Officer Ashok Vaswani said.

Recoveries and upgrades stood at Rs 762 crore, higher than Rs 681 crore a year ago but lower than Rs 830 a quarter ago.

Credit costs, however, continued to rise to 0.68% from 0.65% a quarter ago and 0.38% a year ago. However, Vaswani said that credit costs are beginning to show signs of plateauing, which is a positive indicator.

In terms of the microeconomic environment, there is undoubtedly heightened volatility and a potential of slowdown. Credit strain continues and we are seeing that in various degrees across credit cards, personal loans and microfinance portfolios, Vaswani said.

The bank's advances increased 16% year-on year to Rs 4.33 lakh crore as of Dec. 31, 2024. Unsecured retail advances, including retail microcredit as a percentage of net advances were 10.5%, lower than 11.3% a quarter ago.

Among customer assets, the consumer segment, which contributes the most, rose 17% to Rs 1.98 lakh crore, followed by corporate and commercial rising 15% and 10% year-on-year, respectively.

The small-medium enterprises book of the bank grew 31% on-year in the December quarter.