Kotak Mahindra Bank Q3 Review – capital market-linked biz soft, but steady overall show

Madhuchanda Dey Moneycontrol Research

Kotak Mahindra Bank delivered an overall in line performance. As expected, some of the capital market-related businesses were soft, but the result was directionally positive leaving no room for complaint.

• The group profitability growth of 13.5 percent was driven primarily by the bank that contributed close to 70 percent of the profits compared to 65 percent in the year-ago quarter.


• Other performance drivers were the steady show from the Life insurance business and a strong performance of the asset management company. The latter is interesting after the regulatory changes in the business.


• The performance of the capital market-linked businesses like securities and investment banking was soft on expected lines.

The bank also put up a steady show on a standalone basis with improvement in several key parameters.

• The robust growth in net interest income (the difference between interest income and expenses) was aided by advances growth and improvement in interest margin sequentially as well as YoY to 4.33 percent.


• Non-interest income declined due to trading-related losses although growth in core fees was healthy at 25 percent.


• The growth in operating expenses was a tad higher than usual resulting in a spike in the cost to income ratio to 50.3 percent.


• Consequently, pre-provision profit grew by a modest 6.5 percent to Rs 1,938 crore.


• The bank witnessed a significant write back of investment provision which aided in reporting a significantly higher profit growth.


• On the business front, the bank armed with more than adequate capital (CAR 16.5 percent) appears to be back on a growth path. Advances grew 23.5 percent driven by home loans, Commercial Vehicles, small business loans as well as corporate advances.


• The bank is doing a commendable job on the deposits front. While the overall deposits grew over 18 percent, the low-cost CASA grew by 28.5 percent and CASA share improved further to 50.7 percent.

The bank looks on track to execute its risk-adjusted growth strategy when the competitive landscape is looking exciting for well capitalised better-managed entities and the result echoes that sentiment.