Detailed Narrative
Kotak Mahindra Bank delivered a robust performance in Q2 FY25, with the group reporting a profit after tax of 5,044 crore, marking a 13% year-on-year increase. This growth was significantly bolstered by its non-banking subsidiaries, with Capital Markets, Asset Management, and Insurance segments growing at 52%, 58%, and 50% YoY respectively. The Bank's standalone profit after tax stood at 3,344 crore, up 5% YoY, even as it navigated the full impact of the RBI embargo.
Despite the embargo, the Bank demonstrated strong underlying metrics, with deposits growing 16% YoY and customer assets expanding 18% YoY to 4,50,000 crore. The consolidated customer assets reached 5,10,000 crore, a 19% increase. The CASA ratio remained stable and industry-leading at 43.6%. However, the cost of funds increased by five basis points quarter-on-quarter, and NIM reduced by 11 bps to 4.91% due to a shift towards secured assets and the impact of the embargo on higher-yielding unsecured retail. The Bank's capital adequacy remains strong at 22.6% (consolidated) and 21.5% (CET-1 standalone).
Asset quality showed some mixed trends. Gross NPA was 1.49% and Net NPA was 0.43% as of September 30, 2024, with an annualized credit cost of 65 bps. Management noted some credit stress in the unsecured retail business, particularly credit cards, and in microfinance, attributing it to overleveraging in certain customer segments and slower rural economy. They expressed confidence that credit costs would stabilize and then come down over the next 2-3 quarters, aided by recoveries from rural and secured businesses.
Strategic initiatives included significant progress on technology and risk resilience, in line with RBI's directives, and the beta launch of a new customer-facing mobile app. The acquisition of Standard Chartered's personal loan portfolio was highlighted as a tuck-in strategy aligning with the affluent segment, expected to add a couple of basis points to the average yield on assets. The management also addressed the recent RBI draft circular on investments, stating they are analyzing its implications and will provide comments by November 20th. Overall, the management conveyed a bullish outlook, emphasizing the strength of Kotak as a financial conglomerate and its ability to adapt and grow.