Kotak Bank Q3 preview: Strong performance to continue; slippages, margin view eyed

Kotak Mahindra Bank is expected to report healthy numbers for the quarter ended December on the back of robust credit growth, further improvement in margins, and stable credit costs.

The private sector lender will detail its earnings on Saturday.

Net profit is seen rising over 23% on year to Rs 2,626 crore, according to the average of

six estimates. Net interest income (NII) is expected to grow over 23% on year to Rs 5,342 crore,

Shares of the lender have been an underperformer in the current financial year. The stock has gained a little over 2%, when Nifty Bank has given 22% returns.

Following are the broad expectations by brokerages:

ICICI Securities
The brokerage expects upbeat credit growth, given the robust customer acquisition momentum.

Nominal credit cost trajectory makes it comfortable to scale up unsecured retail lending to early-mid teens.

NIMs are likely to improve further QoQ since the bank has 53% loans linked to external benchmark lending rate (EBLR), which should be beneficial with the rise in interest rates. Therefore, higher advances growth and rise in CD ratio should aid NII growth at 26% YoY and 7% QoQ.

The scaling up of unsecured retail, technology and franchise investment, coupled with retail

customer acquisition and digital spending will keep the cost structure elevated.

The credit cost is likely to normalise to 40-60 bps from a low base of <20 bps in Q2.

Prabhudas Lilladher
Kotak Bank’s loan traction has been strong and the brokerage expects the momentum to continue, building in 23.8% YoY and 5.2% QoQ growth.

Credit cost would remain in the same range, with provision coverage ratio at near to 70%.

CASA accretion will slow down further, hence margins would see only marginal improvement.

Axis Securities
NII growth will remain strong, led by a pick-up in credit growth YoY. Margins are likely to remain stable. Liability franchise will remain strong.

Costs will be largely maintained sequentially with a continuous focus on bank’s digital strategy

Credit costs are likely to normalise and asset quality improvement will be seen QoQ.

Key monitorables for the brokerage will be commentary on net interest margin and growth outlook.

Motilal Oswal Securities
The brokerage expects loan growth to see a strong traction, with traction in unsecured loans likely to be seen. It expects liability franchise to remain strong and margins to be healthy at 5.2%.

Commentary around stress in the SME book and other unsecured loans are key monitorables for the brokerage. It expects asset quality and credit costs to exhibit steady trends.

Sharekhan
The brokerage expects advances to grow by 22% YoY. NIM is likely to remain stable QoQ, with a positive upward bias.

Key monitorable would be deposit growth outlook for the brokerage.

Emkay Global Financial Services
The brokerage expects margins to come-off QoQ, but strong credit growth and lower other income base due to heavy treasury loss last year should boost pre-provision operating profit (PPoP) growth. Slippages will remain similar to that in Q2.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)