NPA ratios well under control for Kotak Bank: Mahantesh Sabarad

"I would reckon that these numbers stand out quite well simply because the NPA ratios are well under control. They have dropped quite significantly, in fact the gross NPA number is sequentially down as well by roughly about Rs 200 crores, so I would say that the banking operations have saved the day," says Mahantesh Sabarad, Independent Market Expert

What is your first reading of these numbers by Kotak Bank?
I think the bank has done well, particularly on the banking side but not necessarily on some of its key subsidiaries. The asset management or the securities business has posted a weaker set of numbers. But I would reckon that these numbers stand out quite well simply because the NPA ratios are well under control. They have dropped quite significantly, in fact the gross NPA number is sequentially down as well by roughly about Rs 200 crores, so I would say that the banking operations have saved the day.

What are the key pointers that you are saying could be a worry going ahead?
The worry is coming from the fact that the deposit growth has been weak. And this has been the case with all the other banks as well, the deposit growth has been weaker which translates into lower CASA ratio for many of them which also means higher cost of borrowing as they go forward and the NIM compression to happen in the subsequent quarters.

5.5% NIM by Kotak this time around, what is the sustainability of that in your view, are they going to be able to sustain that with the falling CASA and with deposit rates starting to go up, but of course Kotak has an excellent mix as well with regard to floating?
So that worry still remains, that is the hangover in terms of NIM compression for all the banks in which Kotak also will not be able to escape. But it is very difficult to say whether that NIM compression starts in the subsequent quarter which is the upcoming March quarter or will it start from the June quarter of the following year but fortunately we are also seeing that the rate hike cycle from the RBI is about to end and inflation has been quite well controlled so you never know what could happen six months down the line in terms of the NIM compression. So right now it appears that the NIM compression can happen, but six months down the line one may have to have a relook at this assumption.