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Informist, Saturday, May 3, 2025

 

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--Kotak Bank: Expect credit cost to stay elevated for next 2 quarters
--CONTEXT: Comments by Kotak Bank's mgmt at post-earnings analyst concall 
--Kotak Bk:Expect slippages on retail microfin to stay elevated for few qtrs 
--Kotak Mahindra Bank: Continue to tread cautiously in microfin segment 
--Kotak Mahindra Bank: Hope to launch new products in affluent segment 
 

 

By Priyasmita Dutta and Pratiksha 

 

NEW DELHI – Kotak Mahindra Bank expects slippages in the microfinance segment to remain high for some more quarters, the senior management at India's fourth-largest private-sector lender said in a post-earnings call with analysts. "The (microfinance) industry showed delinquency which impacted us as well and that's why we de-glued our portfolio," the bank's Deputy Managing Director Shanti Ekambaram said. "We continue to tread cautiously in most markets in this space."

 

Kotak Mahindra Bank has struggled with microfinance lending in the recent past, especially due to its huge credit card business. The bank's financial result for the March quarter of 2024-25 (Apr-Mar), detailed earlier Saturday, showed fresh slippages were up 14% on year at INR 14.88 billion. The bank did not reveal the share of the microfinance segment in the fresh slippages.

 

Higher slippages warrant higher provisioning, which has in the past few quarters hit the bank's financials. The net profit for the March quarter fell over 14% on year as provisions jumped over threefold from a year ago. The net profit for the quarter was INR 35.52 billion, up 7.5% sequentially. Provisions during Jan-Mar were INR 9.09 billion, as compared to INR 2.64 billion a year ago. Sequentially, the provisioning was up nearly 15%. Within the provisions, INR 8.06 billion was set aside for advances and credit, almost double the figure a year ago.

 

Kotak Mahindra Bank has been lowering the share of the retail micro-credit book in its total lending book, and it fell 33% on year and 19% on quarter to INR 6.70 billion in the March quarter. As per the bank's investor presentation, unsecured retail advances as a share of net advances were 10.5% as of the end of March, same as at the end of December, but lower than 11.8% as of March 2024.

 

The lacklustre view on asset quality also pointed towards increased credit cost. Kotak Mahindra Bank's Managing Director and Chief Executive Officer Ashok Vaswani said he expects credit cost to remain high for the next two quarters. In the March quarter, the bank's annualised credit cost was 0.64%, marginally lower than 0.68% in Oct-Dec, but sharply higher than the 0.42% in the corresponding quarter a year ago.

 

On Friday, shares of the bank had closed nearly flat at INR 2,185.20 on the National Stock Exchange. 

 

Going forward, the bank said it hopes to launch new products, particularly in the affluent segment. "Mortgages help us cement a long-term relationship with our customers and increase the wallet share, particularly in the affluent segment, and thus it will continue to remain a focus area," Ekambaram said.  End

 

Edited by Rajeev Pai

 

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