Kotak Mahindra Bank conducted a conference call on 20 July 2024 to discuss its financial results for the quarter ended June 2024. Ashok Vaswani, MD&CEO of the bank addressed the call:
Highlights:
The bank has posted a 79% surge in the consolidated net profit to Rs 7448 crore in Q1FY2024, including post tax gains of Rs 3013 crore from the divestment of a stake in Kotak Mahindra General Insurance.
The bank has offloaded 70% stake in Kotak Mahindra General Insurance Company for a consideration of Rs 5560 crore, which was a wholly owned subsidiary of the company. The bank has generated 45% CAGR return on this investment since 2014. The transaction reflects the true value of the subsidiaries.
The bank evaluates its businesses from the eyes of shareholders.
Consolidated ROE is 13.44% adjusting for divestment gains and RBI investment book valuation impact. Consolidated ROA was at 3.87% including gains and 2.44% excluding the one off items.
With the implementation of the new guidelines on the investment book, the bank has witnessed post tax gains of Rs 3414 crore which has accreted to the reserves.
The standalone net profit of the bank has increased 81% to Rs 6250 crore, including post tax gains of Rs 2730 crore on the stake sale in the general insurance subsidiary.
The NIM of the bank has declined to 5.02% in Q1FY2025 from 5.28% in Q4FY2024 and 5.57% in Q1FY2024. The challenges on the low cost deposits and moderation in the unsecured retail loan growth have impacted the margins of the bank.
The CASA deposit ratio of the bank declined to 43.4% end June 2024 from 49% end June 2023.
Group AUM of the bank has touched Rs 636311 crore end June 2024.
The capital adequacy ratio of the bank has been healthy at 22.8% with CET-1 at 21.9% end June 2024.
The customer assets have moved up 20% to Rs 494105 crore end June 2024.
The bank has posted 21% yoy and 7% qoq growth in the average deposits end June 2024 mainly driven by 38% jump in the term deposits. The CASA deposits growth has impacted due to shift of deposits to investments.
With regards to the RBI embargo on the credit card business and digital acquisition, the bank has made significant progress on all the points in the RBI order. The bank had indicated that the RBI order would impact its 811 customer acquisition and credit cards business. Once the embargo is lifted, the bank expects to rebound stronger.
The unsecured retail loan book growth of the bank has moderated due to embargo on the credit card business and lower disbursements in the microfinance segment. The share of unsecured loan book has declined 20 bps in Q1FY2025. The rest of the business of the bank has grown well.
The bank remains focused on growing its share of unsecured retail loan book to mid-teens.
The bank has witnessed some stress in the consumer, retail and secured lending segments, particularly in the low ticket segment and overleveraged customer segment.
This has led to an increase in the credit costs to 0.55% annualized for Q1FY2025.
The bank does not see any stress in the non individual and secured loan portfolio.
The microfinance business of the bank is spread across 16 States with 27 lakh customers. The asset quality was impacted due to the seasonality and operational limitations during the election period.
The bank aims to grow the microfinance segment in line with the industry. The bank expects better growth in the second half.
The bank has raised the scale of branch expansion to 250 branches per year and expects to raise the branch network to 3000-3500 branches in the next 4-5 years.