Kotak Mahindra Q3 results preview: Profit may rise 25-30%; asset quality to remain stable

NEW DELHI: Kotak Mahindra Bank is likely to report a 25-30 per cent surge in December quarter net profit and a solid 4.4-4.6 per net jump interest margin (NIM).

The private lender, however, may post some moderation in loan growth, when it announces its quarterly earnings on Monday. Analysts said investors must watch out for management commentary on auto and MSME segments.

“Bank’s loan growth is likely to be stable (excluding auto business). Operating profit would continue to be better YoY on strong NIMs with lower cost of funds. Asset quality issues will be limited. Credit cost could be higher but within guidance. Non-lending subsidiary should fare better,” said Prabhudas Lilladher.

This brokerage expects the bank to report a 28.1 per cent YoY rise in net profit at Rs 1,653.70 crore from Rs 1,290.90 crore in the same quarter last year. This would mean a 4.1 per cent sequential drop in profit.

Net interest income (NII) is seen growing 19.2 per cent to Rs 3,502.70 crore in the third quarter from Rs 2,939.10 crore in the year-ago quarter.

“The slowdown in auto sales and cautious approach in MSME segment are seen to keep credit growth at 15 per cent YoY to Rs 2.25 lakh crore. Easing of credit-deposit ratio and reduction in MCLR will be offset by decline in deposit rate, thereby margin is expected to be at 4.5-4.6 per cent. With credit cost steady at 17 bps of advances, earnings are seen to grow at 25 per cent YoY to Rs 1,618 crore. Broad asset quality numbers to remain constant with GNPA at 2.3 per cent,” said ICICI Direct in a note.

Reliance Securities pegs NII growth at Rs 3,564 crore, up 21.3 per cent. It sees profit rising 28.2 per cent to Rs 1,655 crore. The brokerage expects NIM to stay solid at 4.6 per cent, but expects somewhat higher than normal slippages amid a weak operating environment.

Kotak would report most stable earnings amongst the financial companies, said Edelweiss Securities.

“Growth momentum is likely to be above industry-average. Asset quality should be broadly stable, with inline provisioning. Performance of other subsidiaries will continue to be on expected lines,” it said.

This brokerage sees the company’s core PAT at Rs 2,209 crore, up 27 per cent YoY. It also sees pre-provision operating profit rising 33 per cent YoY to Rs 3,302 crore.