With 25% of their profits coming from fast-growing non-banking areas and with the stock price being the same for the last 3 years despite good growth in the banking segment (it may not have the underwriting discipline of HDFC but they are still decent), I cant see how one would lost money on this. Can be a good place to park money if one cant find better opportunities. If the bank results improve, a 25% pop can happen in a matter of days.
6 Likes
The 20-25% pop will happen as soon as the RBI ban is lifted. While it should positively happen within this FY, what worries me a bit is how slow this process has been. Was this issue being handled on a war footing by the company or has the bureaucratic decay of large organizations set in deeply within Kotak?
When a banking company in the digital age is not able to onboard customers online and is still lethargic to fix the issue - it is a red flag for me. Let’s see how this issue evolves.
Disc : Invested
5 Likes
Ban is imposed on 24 April 2024 if I am not wrong. Similar ban on hdfc in past had been initiated by Rbi which got removed in a year duration. Hopefully in next quarter, ban is going to remove.
Disclosure: Holding with almost 1year and only gaining 5% of bought amount.
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5 years if negligible return ( less than 10%) for otherwise a good mgmt , growing large cap stock ( profit > 2x ).
a perfect recipe for stock outperforming index over next 5 years.
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Milind Nagnur Resigns As Chief Operating Officer and Chief Technology Officer Of The Bank w.e.f. February 15, 2025
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Kotak bank PE is low & has good margin of safety. NPA is 1.51% and results are good.
Since the market seems to be in a downtrend, is it wise enough to wait and watch and then invest or to continuously buy on dips.
Disc - Invested in Kotak from past 1 year.
7 Likes
The following are the insights from the Earnings call - Q3-FY25, may please read in conjunction with the results,
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Asset Quality/Slippages: Stress is primarily observed in the commercial vehicle segment. The bank addressed concerns about slippages in microfinance, noting that while microfinance has contributed a higher proportion to slippages this quarter, overall slippages have decreased compared to the previous quarter due to improvements in other secured and commercial businesses. Also, slippages are improving in personal loans. As for microfinance and credit card delinquencies, the bank continues to expect microfinance delinquencies to peak in the near term, while credit card delinquencies have remained stable. Regarding provisioning, the bank follows an aggressive policy. They remain cautiously optimistic as the trends are expected to stabilize over the next few quarters, depending on broader economic conditions. The unsecured book continues to show volatility, but the overall portfolio is well-diversified, providing comfort.
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RBI Restrictions: The bank has achieved strong sequential loan growth across segments despite the challenges posed by the ban, though certain areas like credit cards, unsecured loans (personal loans, microfinance), and the “811” digital deposit program have been significantly impacted. The credit card book has degrown quarter-on-quarter, reducing unsecured loans to 10.5% of total assets compared to a target of 15%. Similarly, the 811 program, critical for driving low-cost granular deposits, has been constrained. The bank remains optimistic about emerging stronger once the embargo is lifted, with plans to revive these areas and accelerate growth. The timeline for lifting the restrictions remains uncertain. They remain in constant dialogue with the RBI, expressing optimism but acknowledging the regulator’s discretion in the decision.
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Growth: On growth, the management emphasized maintaining an ROA above 2% while balancing asset mix and risk. Growth in personal loans and credit cards, key high-yield segments, is expected to resume post-RBI embargo. Growth in unsecured loans, including personal loans, is planned based on analytics and underwriting standards. They also plan to leverage non-interest income sources (fee, distribution income) and cost optimization to sustain ROA. The bank aims to grow market share, targeting a growth rate of 1.5–2x nominal GDP without compromising on risk. Subsidiaries in capital markets have performed well, and the focus remains on maintaining above-average growth in alignment with market opportunities. The Standard Chartered portfolio acquisition is expected to reflect on the books within the quarter, potentially boosting growth. Additionally, it aspires to become one of the top three private-sector banks in profitability by 2030, leveraging both organic and inorganic opportunities, provided acquisitions align strategically and financially.
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Margin & Cost of Funds: . Margins have stabilized this quarter, driven by a favorable cost of funds and a higher share of current account deposits. Growth in unsecured lending and lifting restrictions on certain segments could improve yields, supporting margins in the coming quarters . The bank’s secured portfolio is performing well, and business banking remains fully secured. On cost of funds, the sequential decline was attributed to growth in non-interest-bearing current account balances (up 12% YoY and 5% QoQ), the implementation of SAR rate cuts, and a favorable mix of lower-rate sweep term deposits. Active money growth, which rose 36% YoY, also supported the decline.
Ashok Vaswani — Managing Director and Chief Executive Officer:
“We are quite diversified. There is no particular segment of loan type that overwhelms the balance sheet. So, to that extent, you know that gives me a slightly greater degree comfort”.
Disc: Invested, Not SEBI Registered.
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is the RBI restrictions removed? I got some notification from webscrapper, but couldn’t find the source
yes
restrictions have been removed
I think so best is behind the business
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Great to hear that. Kotak bank got removal of restriction within 10 months. I was expecting to take almost 12-16 months for removal of ban based on time period of HDFC ban removal. Very good work done by Team kotak. I remember Vaswani sir thought in which he said about the ban “It is not that we are going to loose the market share which we fear, it is the reputation , trust and execution capability of bank that is at stake which he fear most.”
Disclaimer: holding and views may be biased. Average price is 1672 with more than 1 years.
3 Likes
Now would love to see how they use this lifting of ban maybe expanding uncsecured book and credit card book when others are in stress.
Further it can help maintain the NIM’s or maybe result in lesser contraction of NIM’s in the rate cut cycle.
Their main growth tigger was before ban that they were able to grow their opening of 811 saving accounts by 33 percent yoy.Which was helping the bank to cater various products.
1 Like
Kotak Bank -
Q1 FY 26 results and concall highlights -
Bank’s standalone P&L outcomes -
NII - 7259 vs 6862 cr, up 6 pc
Other income - 3080 vs 2929 cr, up 5 pc
Total income - 10339 vs 9771 cr, up 6 pc
Operating expenses - 4775 vs 4517 cr, up 6 pc
Operating profit - 5564 vs 5472 cr, up 6 pc
Provisions - 1208 vs 578 cr, up 109 pc
PAT - 3282 vs 3520 cr, down 7 pc
NIMs @ 4.65 vs 5.02 pc
RoA @ 1.94 vs 2.38 pc
CASA ratio @ 41 vs 43 pc
Total deposits @ 4.91 lakh cr, up 13 pc ( CA deposits up 9 pc , SA deposits up 2 pc , Term deposits up 19 pc ). Cost of funds @ 5.01 vs 5.10 pc YoY
Total advances @ 4.44 vs 3.89 lakh, up 14 pc
Segmental growth in advances -
Home loans and LAP - 1.31 lakh cr, up 19 pc
Business banking - 44.5k cr, up 18 pc
Personal loans + Consumer durable loans - 24.4k cr, up 20 pc
Credit cards - 12.9k cr, down 12 pc
Others - 3.1k cr, up 31 pc
CV + CE loans - 42.9k cr, up 13 pc
Agri Finance - 25.1k cr, up 11 pc
Tractor finance - 17.8k cr, up 17 pc
Retail Microcredit - 5.8k cr, down 43 pc
Others - 5.4k cr, down 19 pc
Corporate banking - 1.02 lakh cr, up 10 pc
SME - 34.8k cr, up 23 pc
Others - 7.5k cr, up 37 pc
Credit substitutes - 34k cr, up 14 pc
Overall advances @ 4.44 lakh cr, up 14 pc YoY
Asset Quality -
Opening GNPAs - 6134 vs 5275 cr
Fresh slippages - 1812 vs 1358 cr
Upgrades and recoveries - 549 vs 586 cr
Write offs - 759 vs 570 cr
Closing GNPAs - 6638 vs 5477 cr
GNPAs @ 1.48 vs 1.39 pc ( 6638 vs 5477 cr )
NNPAs @ 0.34 vs 0.35 pc
PCR @ 77 vs 75 pc
Total provisions including specific provisions @ 7440 vs 6037 cr
Performance of subsidiaries -
Kotak securities -
Revenues - 1446 vs 1298 cr
PAT - 465 vs 400 cr
Kotak AMC -
Avg AUM - 5.25 vs 4.21 lakh cr
Equity AUM - 3.32 vs 2.68 lakh cr
PAT - 326 vs 175 cr
Monthly SIP flow @ 1792 cr, up 15 pc YoY
Kotak Mahindra Life Insurance -
Gross written premium - 2861 vs 2857 cr
PAT - 327 vs 174 cr
Kotak Mahindra Prime -
NII - 568 vs 503 cr
Other income - 177 vs 153 cr
PAT - 272 vs 232 cr
NNPAs @ 1.0 vs 0.9 pc
Group’s consolidated profit @ 4472 vs 4435 cr, up 1 pc YoY
Management commentary -
Credit off take is yet to pick up despite rate cuts and liquidity boosting measures by RBI. Demand for retail credit, sales of CVs, PVs remain tepid. Rural India is doing better led by healthy monsoons
MFI segment is the main culprit in elevated credit costs reported in Q1. Management believes, the same has peaked and should see a declining trend in coming Qtrs
Credit Card and Personal loan stress is also plateauing. These two segments are core for banks continued growth and sustenance of good margins
Seeing some stress in retail CV segment
Share of bank’s unsecured advances stood @ 9.7 pc vs 11 pc YoY - due bank being cautious on MFI segment and other unsecured segments
NIM compression is because the bank had to pass on the RBI’s rate cuts on the floating rate book on an immediate basis. As the deposits start to get repriced, NIMs are expected to stabilise in the later half of the year
Home loans seeing pricing pressures / high competitive intensity
CV + CE lending are expected to pickup post monsoons. Q1 was relatively weaker for this segment due early onset on monsoons and regulatory challenges in CE segment which led to price hikes of new CEs. Tractor sales have been good this segment has been doing well for the company
Credit losses / Slippages should start to moderate wef Q2 and should continue moderating for the remainder of the year
Savings account rate has now fallen to 2.5 pc ( wef Q2 ) vs 3.25 pc in Q1
Company’s aspiration is to have a retail unsecured book of 15 pc ( PL + MFIs + Credit Cards ). Bank has started increasing disbursements in all these areas wef Q2
NIMs are likely to bottom out wef Q2 ( as the full benefits of rate cuts are passed on ). Wef Q3, NIMs are expected to rise again as more deposits get repriced and full effects of CRR cut are felt
Company’s avg age of portfolio on term deposits is 9-12 months. Hence the price reduction in the term deposits rates should take some time
Stress in CV lending may continue for another 1-2 Qtrs. Not seeing any significant stress in SME and business banking - a key positive
Company has identified 488 branches from where they r building their gold loan capabilities. On a small base, their Gold loan portfolio has grown by 30 pc YoY
Disc: holding, biased, not SEBI registered, not a buy/sell recommendation, posted for educational purposes
11 Likes
As per the management commentary, stress in MFI and Unsecured lending in general is due to over leveraging by customers and over - zealous lending by Banks + NBFCs chasing higher returns. Both these are ( by and large ) cyclical spaces. I think, we r close to the bottom of this cycle
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After detailed analysis of the results of Kotak Bank and HDFC Bank, I can see that, some of their stress could be cyclic in nature and fundamentals seem to be intact, hence I have removed my earlier posts.
Being a value investor my self, actually it could be an opportunity to stay invested in these boring banks as of now.
3 Likes
I reviewed the bank’s (standalone) performance over the past 10 quarters after seeing
Vineet Bhatia
Sir’s post from my bookmark list, and the growth trend appears below par. The reported numbers don’t fully reflect the performance shown in the investor presentations. Except for Q4 FY24, most quarters haven’t inspired confidence. I’m unsure whether it’s fair to say the bank is highly underperforming since Ashok Vaswani sir took charge, but the trajectory hasn’t been encouraging.
Management will need to show stronger “skin in the game,” especially as the core banking engine seems to be lagging. Under Uday Kotak sir, the market was willing to assign a premium valuation of over 3x book value. With the current performance, that over 3x premium seems difficult. It’s also not surprising that the share price has largely remained sideways. Without a couple of solid Qs, expecting a meaningful rerating might be premature.
At present, the bank doesn’t excite investors with performance; it attracts attention mainly from a value perspective. We’ve seen FIIs sell, while steady SIP inflows likely helped DIIs increase their holdings. I’m yet to dig concalls to understand the underlying issues in depth.
I’m not a banking expert, so I’d welcome inputs from those with deeper sector expertise.
Disclosure: Holding the stock with 8% XIRR, trying to stay rational and not let my investment bias cloud the view. Not a buy/sell recommendation.
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