Kotak Bank Q4 preview: NII likely to post strong growth on robust loan book; to declare dividend on 29 April

Kotak Bank would be the next major Q4 result in the banking space.

On April 29, Kotak Bank’s board of directors will meet to consider and approve the standalone and consolidated financial results for the quarter and year-ended March 31, 2023 period. Also, the board will recommend dividend, if any, on equity shares, for the financial year.

Currently, Kotak’s peers such as HDFC Bank, ICICI Bank, IndusInd Bank and Axis Bank have also declared a dividend for the fiscal. 

Kotak Bank’s Q4 preview: 

In its preview note, Axis Securities stated that Kotak Bank’s advances growth to remain strong, and traction on unsecured products to remain healthy. Also, NII is expected to be healthy and margins are likely to be maintained at ~5.5%. However, the brokerage expects cost ratios to remain flat sequentially, but PPOP growth to be healthy. Asset quality is also seen to be stable.

For the fourth quarter of FY23, brokerage ICICI Direct expects Kotak Bank to report strong growth in advances of 21.5% YoY and 6.1% QoQ to ₹3.29 lakh crore while deposits are expected to grow 13.5% YoY and 2.6% QoQ to ₹3.53 lakh crore. CASA ratio to be largely steady at 54% of deposits. NII is estimated to grow at 31.5% YoY to ₹5946 crore, while NIMs are expected to improve ~23 bps QoQ at 5.7%. Slight moderation in C/I ratio can be seen in Q4FY23 (C/I to be at ~50%).

Thus, ICICI Direct’s note said, “we expect 7.9% YoY and 6.9% QoQ growth in earnings at ₹2984 crore. GNPA ratio is expected to improve ~20 bps QoQ to 1.70%.”

Meanwhile, Prabhudas Lilladher in its report said, “Kotak’s loan traction has been strong and we expect the momentum to continue and build-in 21% YoY & 5.6% QoQ growth.” Additionally, the brokerage expects credit cost to remain in the same range with PCR near to 78%. However, it believes, CASA accretion to slow down further, hence margins would see only marginal improvement.

Among key monitorable is a commentary on NIMs and growth outlook.

During the December 2022 quarter, Kotak surpassed estimates with a PAT of ₹2,791.88 crore registering a growth of a whopping 30.99% year-on-year. Also, NII came in at ₹5,653 crore in Q3 of FY23 up by 30.43 YoY. Net interest margin (NIM) expanded to 5.47% in Q3FY23. Noteworthily, the bank had witnessed an upside in its provisions and contingencies which came in at ₹148.83 crore in the quarter.

As of December 31, 2022, the bank’s gross NPA stood at 1.90%, while net NPA came in at 0.43%.