Kotak Mahindra Bank’s second-quarter consolidated profit rose 26% to ₹5,645 crore as strong loan and deposit growth, a $5.78 billion FCNR(B) mobilisation and improving asset quality outweighed pressure on net interest margins.
Kotak Mahindra Bank reported a sharp rise in second-quarter profit as loan growth, deposit mobilisation and better asset quality offset some pressure on margins. The Mumbai-based lender said consolidated net profit climbed 26% from a year earlier to ₹5,645 crore in the quarter ended September 30, while standalone profit increased 29% to ₹4,212 crore. Net interest income rose 16% to ₹8,459 crore, according to the bank’s results statement and earnings call commentary.
The quarter also showed continued balance-sheet expansion. Net advances grew 25% year on year to ₹5.77 trillion, while customer assets reached ₹6.27 trillion. Deposits rose 19% on an average basis, helped by stronger retail current accounts, and the bank said its CASA ratio, excluding foreign currency non-resident deposits, improved to 41.8%. Management said the lender remains focused on growing in line with nominal GDP over time, but is using its deposit franchise and digital channels to deepen relationships rather than chase volume at any cost.
A major feature of the period was the success of the bank’s foreign currency non-resident, or FCNR(B), mobilisation. Kotak raised $5.78 billion, or ₹55,000 crore, through the programme, a move management said would strengthen longer-term funding and support future lending. Chief financial officer Devang Gheewalla said the liquidity from that programme would be deployed gradually over the next few quarters, while chief executive Ashok Vaswani said the funds were incremental to the bank’s core growth engine. The bank also completed the transfer of the KMIL loan book to the balance sheet in early July, after a regulatory change barred the same business from being run across multiple legal entities.
Margins, however, came under pressure. Net interest margin slipped 22 basis points quarter on quarter to 4.31%, with management citing the cost of FCNR(B) funding, related advances and day-count effects. Executives said the full-quarter impact of the foreign currency deposits will show up more clearly in the third quarter, while repo-rate transmission on the floating-rate book should begin from October and be felt more fully in the fourth quarter. The bank does not give margin guidance, but management said the combination of deployment and repricing should support a gradual improvement.
Asset quality remained a clear strength. Gross non-performing assets eased to 1.04% and net non-performing assets fell to 0.24%, while credit cost improved to 35 basis points from 46 basis points in the previous quarter. The cost-to-income ratio improved to 45.2%, and the cost-to-assets ratio fell to 2.4%. Management said operating expenses rose as the bank kept spending on technology, automation and brand building, but stressed that it intends to trim manual processes and fixed overheads. Analysts have taken comfort from the combination of strong growth and sound credit metrics, even as they note the near-term margin drag from the funding mix.
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