Kotak Mahindra Bank Q3 earnings: Profits in line with estimates; asset quality improves

Profit increase: The net profit increased 15% on-year to Rs 2,131 crore for the quarter ended Dec. The net profit in the same period last quarter was Rs 2,032 crore. The profit was higher than street expectations. Analysts had earlier anticipated a profit of about Rs 2,074 crore. 

Net interest income rises: A bank’s primary business is to borrow money and lend the same at a rate higher than the rate at which they borrowed. The income generated from this differential is known as net interest income. Net interest income for Kotak Mahindra Bank grew 12% YoY to Rs 4,334 crore. The Net Interest Margin increased by 17 bps sequentially to 4.62%. Other income stood at Rs 1,364 crore, an increase of 5.6% over the year.

Kotak Mahindra Quarterly Results

Asset Quality Improve: The asset quality for Kotak bank improved with gross NPA coming down to 2.71% from 3.19% in the last quarter. The bank also reported improvement in the net NPA ratio by 27 basis points sequentially to 0.79%.

The bank has restructured loans worth Rs 348.6 crore under the second Covid restructuring scheme permitted by the regulator. Overall, standard restructured accounts stand at 0.54% of advances.

Deposits and Advances: The Bank’s deposits aggregated to approximately Rs 3.05 lakh crore as of Dec-21, a growth of around 15% year-on-year. Bank’s CASA (current and savings account) deposit now comprises 59.9% of the total deposits of the bank, a slight decline sequentially. CASA capital is the cheapest source of capital for banks. The higher the number, the more profit a bank can earn. Advances rose to Rs 2.53 lakh crore, up by 38% YoY in the quarter ended Dec 21. 

Update from Subsidiaries:- Kotak Securities profit increased to Rs 270 crore, an increase of 46.7% yearly. Kotak Mahindra Prime reported a massive increase in profit. It was up by 70.4% and stood at Rs 254 crore. Another subsidiary that reported a massive return is Kotak Mahindra Capital Company reporting 171% growth on year at Rs 103 crore. Kotak Mahindra Life Insurance's profit increased 48% YoY to Rs 247 crore during Q3FY22.

Kotak Mahindra Bank Q3 results review

Kotak Mahindra Bank has reported a good set of numbers beating street estimates. Sequentially, the bank has done very well in both the topline and bottom line. Its capital adequacy ratio (Basel III) stood at 23.3% from 21.76% last quarter. At the consolidated level, the Return on Assets (annualized) was 2.60% for Q3FY22 compared to 2.21% for Q3FY21, a good growth here. The Return on Equity (annualized) was 14.8% for Q3FY22 compared to 12.8% in the same period last year. The stock price closed 0.5% higher at 1,898.20 on Friday afternoon.