Kotak Mahindra Bank Ltd Q2 FY23 Earnings Conference Call Insights

Key highlights from Kotak Mahindra Bank Ltd (KOTAKBANK) Q2 FY23 Earnings Concall

 Q&A Highlights:

• [00:38:49] Manish Shukla of Axis Capital asked about credit substitutes growing and its nature in terms of duration. K.V.S. Manian Whole-Time Director said the bank this year has built a relatively less than 1 year kind of tenure instruments. So KOTAKBANK in better-rated corporates with lower tenure, prefers to do a credit substitute than loans.

• [00:40:20] Manish Shukla from Axis Capital enquired about the proportion of retail TDs of INR2 crores in overall TDs. Jaimin Bhatt Group CFO replied that it would be about 60% off the overall TDs.

• [00:40:42] Manish Shukla with Axis Capital queried about margin trajectory going forward, if there is more room for expansion. Jaimin Bhatt Group CFO answered that it would be difficult for the bank currently to conclusively say from a NIM rate of around 5.2% where it would end. However, the bank added that it has high-yield book of unsecured retail, which is currently about 8.7% and is growing faster than the rest of the book.

• [00:44:11] Saurabh Kumar of JPMorgan asked about the LCR for 2Q23. Uday Kotak MD replied that the LCR for the quarter was 119.1%.

• [00:44:24] Saurabh Kumar of JPMorgan enquired about any target for unsecured and about microfinance growing quickly. Uday Kotak MD replied that the unsecured retail number of 8.7% includes microfinance. KOTAKBANK’s current comfort based on the cycle is to move to around mid-teens. So the bank is seeing reasonable room for growth in terms of mix.

• [00:47:01] Rahul Jain from Goldman Sachs enquired about deposit growth and when can the bank see the momentum building up with increased rates. Virat Diwanji President Retail Liabilities answered that the bank is highly focused on granular deposits. Also the salaried book is a steady book and the bank will focus on that a little more to build it.

• [00:55:43] Rahul Jain with Goldman Sachs asked that which segments will grow faster in the next couple of quarters and thoughts on growth vs. profitability. Uday Kotak MD answered that it will be driven by the risk return matrix and it won’t let the bank retract from penetrating a segment to be aggressive on pricing.

• [00:58:52] Prakhar Sharma of Jefferies asked about the reason for MTM loss declining drastically in 2Q23. Uday Kotak MD said that it’s because the portfolio would have churned. Also the rates would have changed, and taken some of the portfolio out and bought some new also during that period.

• [01:01:50] Kunal Shah with ICICI Securities asked that on deposits, when does the bank see the action on pricing across the board. Uday Kotak MD replied that the bank has significantly moved term deposit rates and are not dropping rates.  On term deposit, the bank is pricing on market and that’s why it’s healthy for the bank.