Kotak Mahindra Bank is expected to report a stellar 53 percent YoY growth in net profit for the first quarter of this fiscal year amid healthy disbursals, though sequentially there could be a contraction amid pressure on the margins front, analysts said.
The private sector lender is likely to post a net profit of Rs 3,182 crore, representing a 53 percent jump YoY, as per the average of a poll of estimates of brokerages.
Kotak Mahindra Bank had logged a standalone net profit of Rs 2,071.15 crore in the first quarter of the previous fiscal.
However, when compared sequentially, the bank’s Q1 FY24 net profit is projected to contract 9 percent from Rs 3,495.59 crore in Q4 FY23.
Analysts also expect its net interest income (NII) — the difference between interest earned and interest paid – to climb 29 percent YoY to Rs 6,057 crore, compared to Rs 4,697 crore in Q1 FY23.
“PAT is expected to grow…led by healthy advances growth across most segments and re-pricing of asset book. The growth is also expected to be driven by unsecured segment with a very strong growth in personal loans and credit card segment…,” domestic brokerage Ashika said in a note.
Provisioning is expected to decline by 5 percent QoQ (but soar 496 percent YoY) , it said, adding, “With the utilization of provisioning buffer, we expect it to come to a normalized level.”
Operational Metrics
Kotak Mahindra Bank’s net interest margin (NIM) – a key measure of profitability – stood at 5.75 percent at the end of March 2023.
“We expect Kotak's NIM to decline 12 bps QoQ, lower than the decline for ICICI Bank because of improving loan mix. However, from Q2, Kotak's NIM decline could accelerate due to the newly launched sweep deposit scheme,” Nuvama Institutional Equities said.
However, it expects loan growth of 4 percent QoQ (19 percent YoY) for the bank amid healthy disbursements by the sector as a whole.
Analysts at Ashika added that the bank’s NIM is expected to remain in excess of 5 percent in FY24 even in the worst-case scenario.
“Based on RBI data up to May 2023, loan growth has been driven by unsecured loans including credit cards, and trade while growth in NBFCs and housing has moderated,” it added.
As per the RBI data, credit growth stood at 15.6 percent as of May’23, mainly led by retail and service sectors. Overall sectoral growth remained upbeat in 15-17 percent range.
Analysts said healthy credit off-take momentum, healthy treasury operations and relatively muted credit cost are expected to drive healthy performance of banks across segments in 1Q FY24.
Kotak Mahindra Bank shares ended 0.56 percent up at Rs 1,968.35 on July 21 despite an across-the-board sell-off in the market. The shares are up nearly 8 percent on YTD basis.
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