Kotak Mahindra Bank Ltd Q4 FY22 Earnings Conference Call Insights

Key highlights from Kotak Mahindra Bank Ltd (KOTAKBANK) Q4 FY22 Earnings Concall

Management Update:

• KOTAKBANK said that the bank is now seeing a sharp drop in the slippage ratio in terms of the new bad loans. For 4Q22, the slippage on an annualized basis is down to 1.08%, which in absolute numbers is INR736 crores of gross slippage.

Q&A Highlights:

• Mahrukh Adajania from Edelweiss asked about sector outlook and why KOTAK’s growth optimism has not changed despite inflation concerns are rising rate outlook. Uday Kotak MD replied that the bank has to really watch how this whole inflation dynamics play. And see if it really leads to a growth slowdown at this stage. It’s early days and the bank cannot take a call that growth will slow down.

• Mahrukh Adajania from Edelweiss also asked about the proportion of overdraft loans in personal loan. Uday Kotak MD clarified that a very insignificant part of the bank’s total book is overdraft loans. And looking at the bank’s overall unsecured lending, it’s still overall in single-digit percentage out of the total loan book.

• Mahrukh Adajania from Edelweiss queried about the outlook on growth in savings deposits. Shanti Ekambaram answered that growth in savings has been a little slower. The bank’s whole focus this year is going to deepen the hooks into the customer to be able to get the savings growth back again. And on government business, with the receipt of approval of the agency bank and some of the taxes going live in a quarter or two, the bank hopes to build on savings on that as well.

• Rahul Jain of Goldman Sachs asked about the NIM trajectory going forward. Uday Kotak MD answered that the bank is sitting on a reasonably decent CASA ratio. And in terms of NIM, the bank has always priced on a risk-return basis. And added that there’s a higher capital which is helping NIMs.

• Saurabh Kumar from JPMorgan asked about the LCR ratio for the quarter. Jaimin Bhatt CFO answered that LCR average for the quarter is at about 129%, 130%.

• Saurabh Kumar from JPMorgan also asked to quantify the technology spend to revenue or operating cost and the overall view on the operating cost going forward. Jaimin Bhatt CFO replied that operating tech cost as part of the tech cost, capex cost excluded, was about 7.5% thereabouts. And adding the capex, it would be another one-third of that adding to that.

• Saurabh Kumar from JPMorgan asked if savings rate increase will also be on the cards if the bank has increased growth. Uday Kotak MD clarified that at this point of time, there is no plan to increase savings rate.

• Saurabh Kumar from JPMorgan asked if the LCR drawdown would continue for another quarter or so. Jaimin Bhatt CFO replied that it would continue. The numbers put for the previous quarter was about 143%, which is now about 129%.

• Kunal Shah from ICICI Securities asked about the breakup of the loan book between REPO linked other EBR fixed rate loan book.  Jaimin Bhatt CFO said that the overall fixed rate would be about 30%-odd. The one which goes over one year is just about 16%, 17%-odd. The non-fixed rate book, which is about 67-68%, about 48-50% would be EBLR linked and the others would be MCLR linked.