Kotak Mahindra Bank on Wednesday reported an in-line performance with reference to balance sheet growth and profit and loss. However, what took the street by surprise was the net interest margin (NIM) coming in at 4.2 percent, the lowest in 13 quarters.
Balance Sheet growth remained strong as the business of the bank i.e., deposits and advances grew by 22.8 percent year-on-year (YoY) and 6 percent quarter-on-quarter (QoQ) to Rs 3.9 lakh crore.
Deposits growth at 24.2 percent YoY is the highest in the last nine quarters. But this has come in at a cost, as interest expenses grew by 27.6 percent YoY faster than the growth in deposits. The yield on funds has improved as interest income was up 22.1 percent YoY and 6 percent QoQ as against loan growth of 21.2 percent YoY and 4.5 percent QoQ.
For the first time in nine quarters, corporate loan growth has been lower than that of the overall loan book. The corporate book formed 31.4 percent against 32.6 percent QoQ.
Loan growth is near the lowest levels in the past five quarters, while corporate portfolio growth is the lowest in nine quarters. Loan growth was driven by commercial vehicle/construction equipment, unsecured personal loans, credit cards and small business loans and mortgages.
Net interest margin declined to 4.2 percent, lowest in 13 quarters, despite a strong low cost deposit franchise which formed 50.8 percent of the deposits.
The focus of the bank has been on technology which has led to massive improvement in operating efficiency over the last three years.
For sixth quarter in a row, the asset quality of the bank has been on an improving trend. GNPA has declined from 2.59 percent in Q4FY17 to 2.15 percent in Q2FY19. Net NPA has reduced to 0.81 percent in Q2FY19 from 1.26 percent in Q4FY17.
Historically, the NII has been a mirroring factor to profit growth. But this time, profit growth is on the lower side in nine quarters.
Performance of the subsidiaries is also not good this time.
Kotak Securities had a net profit of Rs 112 crore against Rs 118 crore YoY (down 5.1 percent) and against Rs 130 crore QoQ (down 13.9 percent).
Kotak Mahindra Life Insurance had a net profit of Rs 127 crore against Rs 100 crore YoY (up 27 percent) and Rs 117 crore QoQ (up 8.6 percent).
Kotak Mahindra Prime had a net profit of Rs 157 crore against Rs 150 crore YoY (up 4.7 percent) and Rs 139 crore QoQ (up 13 percent).
Kotak Mahindra Investment had a net profit of Rs 45 crore vs Rs 55 crore YoY (down 18.2 percent) and Rs 48 crore QoQ (down 6.3 percent).
First Published: IST