Kotak Mahindra Bank Q3 Preview: Net profit to jump ~16%, margin contraction to prevail

19 Jan 2024 , 11:30 AM

On January 20, Kotak Mahindra Bank is estimated to post a 16% year-on-year increase in standalone net profit to Rs 3,243 crore for the quarter ended December 2023. According to brokerages, net interest income is estimated to be Rs 6,434 crore, up 14% from the previous year.

This will be Kotak Bank’s first quarterly results announcement under Ashok Vaswani.  On January 1, 2024, the senior banker began serving as the bank’s managing director and CEO.

Unlike HDFC Bank (and ICICI Bank), Kotak Mahindra Bank does not provide a quarterly business report, therefore the Street will be watching deposit and advances growth closely.

KRChoksey anticipates significant loan growth of 18.8% year-on-year, driven by robust growth in the retail market across all categories. The deposits are expected to grow by 20.50% YoY, with an increasing contribution from its new product segment, ActivMoney,’ according to the statement.

CASA Ratio

With this, the Street expects the CASA ratio to stay reasonably constant sequentially at 48%. CASA (current accounts, savings accounts) is a low-cost source of money for banks. The bigger the percentage of CASA in deposits, the cheaper the cost of funds.

Net Interest Margin and Asset Quality

Axis Securities anticipates margin shrinkage to continue as deposits are repriced. NIMs are expected to decline by around 10-15 basis points. One basis point equals one-hundredth of a percentage point.

Asset quality will increase compared to a quarter ago. GNPA is expected to be 1.63%, with NNPA at 0.34%, compared to 1.72% and 0.37% in the third quarter of FY23, respectively.

So far, the banking sector’s performance has been uneven, with HDFC Bank failing the Street and IndusInd Bank above analyst expectations. Following the announcement of results by ICICI Bank and Kotak Bank on January 20, a clear industry trend will emerge.

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