Tapering slippages in personal loans, credit cards offset micro-finance stress in Q3: Kotak Mahindra Bank

Kotak Mahindra Bank's fresh slippages stood at Rs 1,657 crore in Q3FY25

Kotak Mahindra Bank delivered a solid performance in Q3FY25, driven by healthy growth in profit and net interest income (NII). The private lender reported a 10 percent year-on-year (YoY) increase in net profit, supported by stable core operations. However, the quarter also highlighted mixed signals on asset quality, with slippages rising on a yearly basis but declining sequentially, which helped contain further deterioration.

During the analyst conference call, the management attributed the sequential improvement in asset quality to tapering slippages in personal loans and stabilisation in credit card delinquencies. These factors played a pivotal role in mitigating the overall impact of rising slippages in the microfinance segment.

Looking ahead, the management expressed cautious optimism about asset quality trends, underlining the need to closely monitor the interplay between tapering slippages in personal loans and credit cards and the ongoing pressures in microfinance. "For now, we need to observe these trends over the next few quarters. As such, I remain cautiously optimistic while closely monitoring the situation," the management stated.

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According to its Q3FY25 investor presentation, Kotak Mahindra Bank's fresh slippages declined to Rs 1,657 crore in Q3FY25 from Rs 1,875 crore in Q2FY25, reflecting a quarter-on-quarter (QoQ) improvement. However, on a yearly basis, slippages rose from Rs 1,177 crore in Q3FY24, underscoring the need for vigilance.

As a result, the lender's gross non-performing asset ratio (GNPA) improved to 1.5 percent in Q3FY25 from 1.73 percent in Q3FY24. Meanwhile, its net non performing asset (NNPA) ratio declined to 0.4 percent in Q3FY25 from 0.3 percent in Q3FY24.

Financially, the bank’s net profit stood at Rs 4,702 crore for Q3FY25, marking a 10 percent YoY growth but a 7 percent sequential decline from Rs 5,044 crore in Q2FY25. NII showed consistent growth, increasing 10 percent YoY to Rs 7,196 crore, underscoring the bank’s ability to maintain core profitability despite external challenges.