Kotak Mahindra Bank Expects Stable Q3 Earnings: Analysts

Banks are currently under scrutiny as market participants respond unfavourably to any Q3 performance disappointments, leading to sharp corrections in stock prices, as seen with HDFC Bank. While credit growth is expected to remain steady, there are concerns about a potential moderation in unsecured loan growth across banks. Analysts also emphasise the importance of monitoring deposit growth.

Preview reports from analysts suggest that asset quality is likely to stay strong, resulting in lower slippages, but the pace of recovery and upgrades may decrease. A 15-20 basis points decline in Net Interest Margins (NIMs) is anticipated, with limited room for expansion in loan yields and higher deposit costs.

Regarding Kotak Mahindra Bank's Q3 expectations, Motilal Oswal Financial Services (MOFSL) predicts steady loan growth, healthy liability expansion, margin compression and controlled asset quality. Net Interest Income is expected to grow by 15.2 per cent YoY to Rs 6510 Crore, with operating profits at Rs 4830 Crore, a 25.5 per cent YoY increase. MOFSL analysts project Kotak Mahindra Bank's net profit to be Rs 3,360 Crore, reflecting a 20.3 per cent YoY growth.

Axis Securities anticipates sustained business growth momentum for Kotak Mahindra Bank, with a focus on monitoring the unsecured portfolio. They expect continued margin contraction, projecting a 10-15 basis points decline in Net Interest Margins. However, stable cost ratios are expected to support operational profitability and steady credit costs should contribute to earnings, while asset quality is anticipated to remain stable.

Analysts at BNP Paribas highlight Kotak Mahindra Bank's strong CASA ratio, standing at 46 per cent of NDTL as of 1HFY24. Despite using high rates initially for deposit build-up, current savings account rates are only slightly higher than those of major private banks. BNP Paribas analysts also commend Kotak Mahindra Bank's decade-long asset quality performance, second only to HDFC Bank among India's large banks.