Kotak Mahindra Bank Q1 FY19-20 Results

Kotak Mahindra Bank Q1 FY20 Financial Highlights

Introduction

In this article, we will see highlights of Kotak Mahindra Bank Q1 FY19-20 results. The bank has seen 33% Y-o-Y growth in net profit for June quarter.

Kotak Mahindra Bank Q1 FY19-20 Results

Q1 FY2019-20 Results Update

• Net Interest Income (NII) : NII growth of 22.8% YoY due to bank’s strong pricing power on assets and favourable growth moves from liabilities. NII has increased 4.1% Q-o-Q.
• Non-Interest Income : Its growth is moderated to 12% YoY mainly led by lower growth in advances. Non-interest income has slower growth due to muted fee income.
• Total Net Income : It has seen a growth of 19% Y-o-Y and 3.7% Q-o-Q.
• Operating Profit : It is improved marginally by 5% Q-o-Q to Rs.2,399 Cr in Q1 FY20 and 18% Y-o-Y. We can say the operating profit growth is subdued on account of muted growth of non-interest income in Q1 FY20.
• Provisions : Provisions are reduced Y-o-Y by 3.3% to Rs.317 Cr in Q1 FY20 from Rs.470 Cr in Q1 FY19. Provisions were marginally up Q-o-Q by 8.5% but bank improved its provisioning coverage ratio (PCR) on asset quality.
• Net Profit (PAT) : Higher Q-o-Q provisioning has lowered PAT numbers. Though Net profit has surged by 33% Y-o-Y, it has shown a negative growth of 3.4% Q-o-Q. Quarterly net profits are decreased on account of increase in the provisioning by the bank.

Balance sheet Summary Q1 FY20

Balance sheet Summary

• For Q1 FY20, Advances, Total Deposits and CASA deposits have seen a Y-o-Y growth of 18%, 23% and 24% respectively as compared with the respective numbers in Q1 FY19.
• While if the Q-o-Q growth is considered, Advances and Total Deposits have increased by 1.1% and 3.1% respectively. And CASA deposits is decreased by 1.2% Q-o-Q.

Key Ratios

1. Gross NPA & Net NPA : In Q1 FY20, Gross NPAs is marginally increased by 5bps Q-o-Q to 2.19% from 2.14% in Q4 FY19, while Net NPAs declined by 2bps QoQ to 0.73% from 0.75%.
2. Provision Coverage Ratio (PCR) : The Bank raised its Provision Coverage Ratio (PCR) by 160bps QoQ to 67% as on Q1 FY20.
3. Capital Adequacy Ratio (CAR) : CAR has improved to 17.8% in Q1 FY20 from 17.76% in Q1 FY19 and 17.45% in Q4 FY19. It is a positive sign for the bank.
4. Net Interest Margin (NIM)
   • NIM was sequentially stable at 4.49% and higher on YoY comparison.(4.28% in Q1 FY19). It is led by efficient liability management and improved pricing power owing to decline in competition from the NBFCs.
   • During 1QFY20, SA rates were lowered to 4% from 5% for accounts with balances < Rs.1lakh.

Advances & Deposits Mix Q1 FY20

Advances Q1 FY20

• Quarterly loan growth was mainly driven by consumer loans, main home loans/loans against property (LAP). The bank has managed its agri portfolio by avoiding crop loans. Its agri book largely consists of tractor loans, where collection efficiency has been good.
• On CV/CE (Commercial Vehicle/ Construction Equipment) loans, asset quality was healthy so far, despite elongated collection cycles for customers, increasing the Bank’s caution towards this segment.
• Conservative lending approach and strong focus on risk adjusted returns should continue to aid Kotak Mahindra Bank’s asset quality.

Deposits Q1 FY20

• Deposits growth remains positive in both CASA & TDs. CASA growth was healthy 24% YoY, higher than overall deposits growth of 23% YoY.
• CASA has reamined almost same with the bank’s strategy to achieve a continuous robust growth. It has increased by 24% Y-o-Y. But it is reduced marginally by 1.2% Q-o-Q.
• There is a slight improvement in the Term Deposits (TDs) Q-o-Q.

Conclusion

Kotak Mahidra Bank has strengthened its liability profile with increased share of granular retail loans and sharp rise in CASA Y-o-Y. Its conservative lending and healthy performance across the asset quality cycles make it a preferred stock in private banks.