Kotak Mahindra Bank (KMB) has delivered a robust financial performance in the second quarter of the fiscal year 202324, with a remarkable 24% increase in net profit.
This substantial growth translates to a net profit of Rs 4,461 crore, a significant improvement compared to the Rs 3,608 crore reported in the same period last year (Q2FY23).
ROBUST STANDALONE PERFORMANCE
On a standalone basis, Kotak Mahindra Bank reported a net profit of Rs 3,191 crore for the second quarter of the fiscal year 202324 (Q2FY24).
This marks an impressive 24% year on year increase from Rs 2,581 crore in the corresponding period of the previous fiscal year (Q2FY23).
The bank attributes this strong performance to an enhancement in net interest margins (NIMs), which signifies the difference between interest earnings and expenses.
GROWTH IN NET INTEREST INCOME
Kotak Mahindra Bank’s net interest income (NII), a critical indicator in banking, has seen substantial growth.
In Q2FY24, NII surged by 23% year on year, reaching Rs 6,297 crore. This is a considerable uptick from the Rs 5,099 crore reported for the same period in the previous fiscal year (Q2FY23).
HEALTHY NET INTEREST MARGINS
The bank’s net interest margin (NIM), which reflects its profitability and efficient fund management, has improved.
For Q2FY24, the NIM stands at 5.22%, reflecting a boost from 5.15% the previous year.
However, it is worth noting that this margin has moderated slightly when compared to the previous quarter, declining from 5.57% in Q1FY24 to 5.22% in Q2FY24.
KOTAK MAHINDRA BANK FEE AND SERVICES INCOME
Kotak Mahindra Bank has experienced a significant rise in fees and services income, with a growth rate of 24% year on year.
In Q2FY24, this income category reached Rs 2,026 crore, a notable increase from the Rs 1,638 crore recorded in the same period of the previous fiscal year (Q2FY23).
ADVANCES AND LOAN PORTFOLIO
The bank’s advances, reflecting the loans and credit extended to customers, witnessed a remarkable 21% year on year growth.
As of the end of September 2023, the total advances reached an impressive Rs 3.57 trillion. Key segments driving this growth include home loans, loans against properties, corporate loans, and consumer bank working capital (WC).
CREDIT CARD AND MICRO FINANCE GROWTH
Notably, Kotak Mahindra Bank’s credit card book exhibited significant growth, surging by 59% year on year.
Additionally, Retail Micro Finance, another vital segment, saw a substantial 80% year on year growth.
The share of unsecured retail loans in advances has increased to 11% in September 2023, up from 8.7% a year ago.
ASSET QUALITY IMPROVEMENT
Kotak Mahindra Bank’s asset quality profile has shown improvement, both year on year and sequentially.
The gross nonperforming assets (NPA) ratio has declined to 1.72% in September 2023, marking a decrease from 2.08% in September 2022 and 1.77% in the previous quarter.
The net NPA ratio also improved to 0.37% in September 2023, down from 0.55% a year ago and 0.40% in the previous quarter.
STRONG PROVISION COVERAGE
The bank maintains a strong provision coverage ratio (PCR) at 79.1% as of September 2023.
This represents a significant increase compared to 73.7% in the year ago period and 78% in the previous quarter.
A robust PCR is essential for banks to cover potential bad loans and maintain financial stability.
DEPOSIT GROWTH AND CASA SHARE
Kotak Mahindra Bank has experienced notable growth in deposits, with a remarkable 23.3% year on year increase, resulting in total deposits of Rs 4.0 trillion at the end of September 2023.
However, the share of low cost deposits, including Current Account and Savings Account (CASA), has declined to 48.3% in September 2023 from 56.2% a year ago and 49.0% in the previous quarter.
This shift indicates increased competition for deposits and a changing deposit mix, which may impact the bank’s cost of funds and profitability.
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