Private sector lender Kotak Mahindra Bank is expected to see around 20 percent year-on-year decline in its Q2 FY21 profit due to a potential spike in provisions.
The growth in net interest income could also slow down to around 12 percent year-on-year with moderate loan growth and a slight contraction in net interest margin for the quarter ended September 2020.
The pre-provision in operating profit (PPoP) growth is also expected to moderate to little over 10 percent YoY due to slow growth in net interest income and other income, supported by controlled operating expenses.
"We expect net interest margin to dip, on account of asset side re-pricing and a lower cost-to-deposit ratio. NIMs will be partially cushioned by the recent drop in saving account rates and the recent fundraise. We expect NII growth of 12.6 percent YoY (up 1 percent QoQ)," said HDFC Securities.
"With controlled operating expenses growth PPoP is expected to grow at 10.5 percent YoY and 5.6 percent QoQ. We have factored in higher provisions (up 2.3x YoY and flat QoQ). Consequently, PAT is expected to de-grow 20.7 percent YoY but up 10 percent QoQ," the brokerage added.
Also Read | Kotak Mahindra Bank is exploring takeover of IndusInd Bank
Asset quality issues are expected to remain in control and credit cost are expected to come down sequentially as provisions come down too, Prabhudas Lilladher said.
Motilal Oswal also feels asset quality is likely to remain largely stable, with gross non-performing assets at around 2.8 percent and net NPA at 0.9 percent. The brokerage sees 20 percent decline profit but expects 12.6 percent growth in NII and 10.1 percent in PPoP.
Key things to watch out for would be comments on growth and overall stress, additional provisions towards COVID-19/ increase in PCR and performance of subsidiaries.
The stock has not seen major movement during the September quarter and financial year 2020-21, falling 6.8 percent and rising 6.7 percent respectively, though it gained 26 percent from March lows. Asset quality concerns weighed overall on banking stocks.
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