Kotak Mahindra Bank on Saturday posted a net profit of ₹2,792 crore for Q3FY23, 31 per cent higher y-o-y and 8 per cent higher on quarterly basis. Advances rose 23 per cent y-o-y and 6 per cent q-o-q to ₹3.1 lakh crore as of December 31.

In the post-earnings call, CFO Jaimin Bhatt said that unlike earlier the bank is now more comfortable on the unsecured retail book —including retail MFI — and will look to grow it to around early to mid-teens as a share of total advances from 9.3 per cent currently.

While corporate credit is picking up, the bank saw healthy y-o-y growth of 32 per cent in credit substitutes, largely corporate securities, Bhatt said, adding that retail growth is healthy, and commercial credit is also growing reasonably well across segments.

NII up 30%

Net Interest Income (NII) for the quarter increased 30 per cent on year to ₹5,653 crore. Net Interest Margin (NIM) was at 5.47 per cent.

Bhatt said that Kotak Bank has benefitted from the faster transmission of rate increase in loans as 69 per cent of its loans are at floating rate, of which 55 per cent are linked to an external benchmark. While deposit rates have also starting increasing, there is still some more room for the NIM to go higher, he said.

On the proposed transition to the ECL framework for provisions, Bhatt said that the gap between the current provisions and the proposed framework is only a “few hundred crores”, adding that the transition to the Ind-AS framework will also allow the bank to benefit from MTM gains on investments as the bank is sitting on “decent gains which are not accounted for currently”.

The bank took a hit of ₹51 crore in fixed income trading and MTM book during the quarter.

The bank saw slippages of ₹748 crore in Q3FY23 of which ₹171 crore were upgraded within the same quarter, taking total recoveries and upgrades to ₹874 crore.

Gross NPA ratio of the bank improved to 1.9 per cent as of December 31 from 2.1 per cent a quarter ago and 2.7 per cent a year ago. Net NPA ratio at 0.4 per cent was also better than 0.6 per cent in the previous quarter and 0.8 per cent in the previous year.

Asked on his outlook of credit quality, Joint MD Dipak Gupta said that usually cheque bounces is one of the early signs of changing delinquencies, but at the moment, cheque bounce percentages and other indicators look “very healthy” and any trends which might show things are getting worse are still some time away.

Deposits up

Deposits of the bank grew 12.9 per cent YoY to Rs 3.4 lakh crore, of which low-cost CASA deposits accounted for 53.3 per cent of total deposits.

Kotak Bank had slowed down on growing term deposits when credit demand was muted during the pandemic. However, CASA deposits continued to grow at a steady pace which is why the growth there looks smaller than term deposits, Bhatt said.

Further, when rates started going up from last year, higher bulkier depositors moved from savings accounts to term deposits and MFs in search for better returns, leading to a short-term hit on savings deposits, Gupta said. “When the asset base grows, savings accounts can’t grow at same pace, so you substitute them with bulkier corporate deposits,” he said.