Result-AnalysisResult-Analysis-Image

Kotak Bank 1QFY21 Result 1QFY21 4QFY20 1QFY20 QoQ% YoY%
Net Interest Income 3724 3560 3161 4.6% 17.8%
Other Income 774 1489 1317 -48.0% -41.2%
Fee and Services 776 1270 1162 -38.9% -33.2%
Others (2) 219 155 -100.9% -101.3%
Net Total Income 4498 5049 4478 -10.9% 0.4%
Employee Cost 911 970 902 -6.1% 1.0%
Other Operating Expenses 963 1354 1177 -28.9% -18.2%
Operating Expenditure 1874 2324 2079 -19.4% -9.9%
Operating Profit 2624 2725 2399 -3.7% 9.4%
Provision On Adv/Receivables (net) 353 373 273 -5.4% 29.3%
General provision – COVID related 616 650 -5.2%
Provision On Investments (7) 24 44 -129.2% -115.9%
Provision and Contingencies 962 1047 317 -8.1% 203.5%
Profit Before Tax 1662 1678 2082 -1.0% -20.2%
Provision For Tax 418 411 722 1.7% -42.1%
Net Profit 1244 1267 1360 -1.8% -8.5%
Asset Quality 1QFY21 4QFY20 1QFY20 QoQ% YoY%
Gross NPA 5619 5027 4614 11.8% 21.8%
Net NPA 1777 1558 1524 14.1% 16.6%
Gross NPA (%) 2.70% 2.25% 2.19% (45) bps (51) bps
Net NPA (%) 0.87% 0.71% 0.73% (16) bps (14) bps
PCR 68.40% 69% 67% (60) bps 140 bps
Slippages 796 491 751 62.1% 6.0%

 

Result Highlight:

  • Net interest income grew by 17.8% YoY and 4.6% QoQ at Rs 3724 cr led by decline in interest expenses.
  • Net profit declined 8.5% YoY and 1.8% QoQ at Rs 1244.45 cr.
  • Loan growth declined 2% YoY and 7% QoQ but total assets grew strongly at 20% YoY and 5% QoQ funded by higher CASA and borrowings.
  • The strong traction on CASA continued with growth of 34% in average savings deposits.
  • Total deposits grew 12% YoY with CASA deposits growing faster at 27% YoY.
  • GNPAs rose sharply by 12% QoQ to 2.7% as management chose to recognize the pain upfront.
  • The bank has unbooked gains of Rs 3000 crore on the bond portfolio as of June 30, 2020.
  • The moratorium is higher on SME loans. The moratorium on real estate is not higher than other wholesale loans.

Management Concall:

  • Board has approved renewal for Mr. Uday Kotak and Mr. Dipak Gupta for 3 years from January 2021
  • Negative loan and credit substitute growth, Net Interest Income still grew 17.8% reflecting better quality of earnings at lower risk.
  • 95% of loans under moratorium-2 are from moratorium-1. 80% of moratorium-2 loans are secured.
  • The bank has been very selective in offering moratorium-2.
  • Mr Uday Kotak’s clear message was that the bank will not shy away from showing more NPLs and credit costs.
  • Other income was lower as it has chosen not to book profits but earn interest on investments.
  • Provision hit of Rs 960 Crore (including 620 crore Covid provisions) – cumulative Rs 1270 cr. (62 bps of overall advances).
  • CASA ratio of 56.7% – savings growth across all retail customer segments.

View:

Private lender Kotak Mahindra Bank delivers weak Q1 performance. The bank also becomes the first of the large private banks to report a decline in its loan book. The bank will continue to focus on lending to SMEs under the Emergency Credit Line Guarantee Scheme (ECLGS) scheme. The bank disbursed only INR 5.5bn towards the scheme in Q1FY21. Mr Uday Kotak’s clear message was that the bank will not shy away from showing more NPLs and credit costs. Despite slower-than-sector loan growth , overall commentary is positive we will see some positive upside movement in coming quarter.

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Elite Wealth Advisors Limited does/does not do business with companies covered in its research reports. Investors should be aware that the Elite Wealth Advisors Limited may/may not have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as read more


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