Kotak Mahindra Bank on Saturday reported a 14.29 per cent increase in its March quarter consolidated net profit at Rs 4,566 crore, driven by healthy performance on the core parameters.
On a standalone basis, the private sector lender's post-tax net profit jumped 34 per cent to Rs 3,496 crore, indicating that the subsidiaries' performance limited the profit growth at a consolidated level.
The bank's net profit for FY23 came at Rs 10,939 crore on a standalone basis, up from Rs 8,573 crore in the year-ago period.
Its core net interest income grew 35 per cent to Rs 6,103 crore on an 18 per cent increase in advances and a huge widening in the net interest margin to an impressive 5.75 per cent.
The bank's other income grew by over 30 per cent to Rs 2,186 crore, up from Rs 1,705 crore in the year-ago period and Rs 1,948 crore in the preceding December quarter.
Its chief financial officer Jaimin Bhatt said the margins have benefited because of the repeated hikes in interest rates by the RBI as a good part of its loans are linked to the external benchmark of repo rate, and added that 5.75 per cent is a peak.
He said the bank has always had higher margins when compared to peers, and it will aim to keep the number above the 5 per cent mark.
Its managing director and chief executive Uday Kotak said the bank's credit growth will grow at 1.5-2 times the nominal growth, which he estimated to come at above 11 per cent. Corporate credit growth will come at 15-20 per cent.
The corporate loan portfolio grew by 1 per cent in the reporting quarter, and President K V S Manian said the corporate bank is not witnessing a very strong capacity creation by the corporate sector.
Making it clear that the right risk-return rewards are a necessity for it to grow the book, Manian said the bank is witnessing a “pricing pressure” in the market at present.
“There is a significant amount of irrational pricing. We have seen BBB (rated) entities get the same pricing as AA ones,” he said.
His colleague Shanti Ekambaram, who heads the retail business, said even though the mortgage loans segment witnessed a 22 per cent rise in the book, the bank has experienced a plateauing of growth in the segment.
She said demand for luxury housing continues to be higher, while the same for lower priced ones has been impacted, indicating that flat owners are having to rethink because of the increasing interest rates.
At a time when there are heightened concerns over unsecured lending, the bank is aiming for faster growth in this segment, joint managing director Dipak Gupta said, adding that its contribution to the overall book will rise to mid-teens from the present 10 per cent levels.
From an asset quality perspective, it showed an improvement with the gross non-performing assets ratio improving to 1.78 per cent against 2.34 per cent in the year-ago period and 1.90 per cent in the quarter-ago period.
Provisions came at Rs 147 crore compared to Rs 148 crore in the preceding quarter, leading Kotak to say that its credit costs are among the lowest in the industry.
The bank's overall capital adequacy came at 21.80 per cent as of March 31, 2023.
Among the subsidiaries, Bhatt said non-bank lender Kotak Prime saw a decline in the March quarter net at Rs 224 crore from Rs 313 crore in the year-ago period due to a change in accounting policies, while the choppy markets impacted its capital market-linked subsidiaries' businesses, while the asset management arm's profit jumped to Rs 192 crore.