Kotak Mahindra Bank Ltd Q3 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Kunal Shah - Citigroup - Analyst : Yeah. Congratulations for a good set of numbers in such a challenging environment. So firstly, any update with respect to the RBI restriction. You have indicated that there is substantial progress. But if you can just indicate if where are we in terms of the audit report submitted and maybe how has been deferred back from the regulator, yeah, that would be helpful.

Question: Kunal Shah - Citigroup - Analyst : Are we done whatever was required from our end and all the submissions are done? Or how should we look at it?

Question: Kunal Shah - Citigroup - Analyst : Sure. And the second question is on, so you indicated some buildup of stress on the commercial vehicle side. But besides that, any other segment that you would be worried about? And PL, we are seeing improved delinquencies. So would we start to push for growth in TL now compared to

Question: Kunal Shah - Citigroup - Analyst : Yeah.

Question: Chintan Joshi - Autonomous Research - Analyst : Can I ask two questions, please? One, on your provisioning policy and one on growth. If I start with provisioning policy, could you give us a little bit more detail around that when do you fully write-off a nonperforming loan, especially on the unsecured side? Or do you kind of assume some recovery rate, color around how you kind of treat customers where they default on one product when they have multiple loan products with you? A little bit of color around that would be helpful. And then I have one on growth.

Question: Chintan Joshi - Autonomous Research - Analyst : So write-off on retail product, 100%, but with a lookout period. So I would say there's some recovery rate assumption there. And then it kind of takes the account is --?

Question: Chintan Joshi - Autonomous Research - Analyst : Okay. Thank you for that. And then on growth, the second question. I'm just trying to think about the current environment, your kind of current ROAs are at about 2.1% levels. Where can you take incremental market share where the front book ROAs can reflect well on the back book ROAs without taking excessive risk. So is it kind of retail consumer which is kind of being the main growth driver? But that's kind of slowing down. So I'm wondering if that can sustain the above average growth corporate margins look weak, deposit competition refuses to ease. Just trying to understand that. And also, similarly on your subsidiaries, you've had very two strong years in capital markets. How should we think about kind of there sequentially? Thank you.

Question: Mahrukh Adajania - Nuvama - Analyst : Yeah, hi. Congratulations. I have two questions. First, see that your loan growth has been strong sequentially, which is very good. You've grown in a balanced fashion in most segments. So in that sense, the ban is not impacting your growth, right? It's more about, obviously, banks have to be digital and e-digital for onboarding customers and you need to be up to date in tech, but despite the ban, you have achieved a sequential growth, which is materially better than other banks. So would it have been different if the ban would have been lifted or the ban is impacting the overall customer franchise, but not really the loan growth? That's my first question. And my second question is that different banks are at a different stage of asset quality, but most of the channel checks or the macro checks or [bureau] check funds the give negative indicators only. So are these lagged indicators? Or is it that asset quality going ahead is likely to remain volatile given that these indicators are still emerging or still being seen, and therefore, credit for the sector will continue to be volatile. So you may have seen lower slippages now. Do you think that your slippages would have peaked or there could always be some other linked sectors of stress. That's my next question.

Question: Mahrukh Adajania - Nuvama - Analyst : Will the growth trajectory change? Or it is just a different mix?

Question: Mahrukh Adajania - Nuvama - Analyst : Got it. And can I just slip in one more question, please?

Question: Mahrukh Adajania - Nuvama - Analyst : So in the last call, you had mentioned that you wanted to be among the top four banks, right, over five years. You meant organically or a material inorganic -- I mean, a material acquisition as well?

Question: Rahul Jain - Goldman Sachs - Analyst : Just a couple of questions. So just to maybe ask differently on credit costs and slippages. So I think what I understood is MFI, still a bit of a trouble, CCs plateauing, PL is gradually improving, not the recoveries or whatever in that [20], but the new formation of NPLs. So does it mean that the slippages will peak in this year and thereafter into the next year will start to improve, considering whatever has been happening in the broader economy? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 18, 2025 / 12:00PM, KTKM.NS - Q3 2025 Kotak Mahindra Bank Ltd Earnings Call

Question: Rahul Jain - Goldman Sachs - Analyst : Got it. And credit costs should see a similar trend, therefore, right? So I would reckon that this quarter a significant part of the credit cost may have come from let's say, write-off of the MFI loans, the write-off figures and maybe unsecured, which you have to recognize. So as you get into the next year, all of this would have been recognized as slippages trend further keeping in mind, like you said, Ashok, where we are in the economy, credit cards also should start to taper off. Would that be a fair assumption to make? Is this how you're also thinking about your -- this line item?

Question: Rahul Jain - Goldman Sachs - Analyst : Very comforting. And on a similar note, any qualitative trends you can share about the early bucket movements in both the secured and the unsecured portfolio? Secure, I mean, excluding the home loans and the LAP book, if you can just share qualitatively how you're seeing those? Are those stable because the environment -- I mean, the different players are sharing different views and different data points resisting different trends. So how are you seeing in your portfolio? A qualitative comment would be helpful to us. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 18, 2025 / 12:00PM, KTKM.NS - Q3 2025 Kotak Mahindra Bank Ltd Earnings Call

Question: Rahul Jain - Goldman Sachs - Analyst : Got it. Just lightly switching gears to the margins. So clearly, the mix has changed over the last two quarters with absence of new CC onboarding and MFI, et cetera, to high-yielding portfolio. So now margin is clearly stabilized in this quarter, which is great. How should we think about it next year because I think some of these components will come back, you will have Standard book also, so shall we assume that margins have bottomed out and next year they might have the upward bias?

Question: Rahul Jain - Goldman Sachs - Analyst : Very helpful. Just one last data giving question, two data points, if you can share. One is the employee count at the bank level. And also in your business banking book, how much is unsecured?

Question: Rahul Jain - Goldman Sachs - Analyst : Okay. Very comforting.

Question: Abhishek M - HSBC - Analyst : Congratulations for the quarter. So the question I have is on this RBI's bank subsidiary norms. How are you positioning the bank and the group to meet that circular? So for example, I mean, if you take the example of real estate, different stages of financing is done in different entities. How would that adjust or be adjusted? Or would you have to do everything in the bank? So just from a business angle, how are you preparing for that circular?

Question: Abhishek M - HSBC - Analyst : Okay. And if you don't mind, can I squeeze in just one more question.

Question: Abhishek M - HSBC - Analyst : So this is on cost of funds specifically. One, can you give the balances on in active money maybe this quarter and the last quarter? And second, if I look at the QoQ movement in cost of funds, there's been 8, 9 bps decline, maybe 4 or 5 out of that is coming due to the SAR rate card. But the rest of the drop QoQ, is that because of active money balances going up a lot? Or is there some other repricing? Or how has the cost of funds really come down sequentially ex of the SAR rate impact?

Question: Abhishek M - HSBC - Analyst : So how sustainable is this average current account growth? I mean, what are you doing at a business level to keep pushing it up? Or it can be a bit of an aberration and then it subside. So that's what I'm trying to understand, because this is critical to your cost of funds in NIM.

Question: Abhishek M - HSBC - Analyst : Great. Great. And all the best for the next quarter. Please share the ActivMoney balance if you can. Otherwise, it's great.

Question: Abhishek M - HSBC - Analyst : Sorry. Yeah, my bad. I will pick it up.

Question: Piran Engineer - CLSA - Analyst : Just a couple of clarifications. Firstly, on slippages, which are down about INR200 crores-odd QoQ. Is it entirely driven by retail, which means that unsecured slippages have still remained as high as last quarter? Or I'm a bit confused here.

Question: Piran Engineer - CLSA - Analyst : Got it. Got it. Okay. That's clarified. And secondly, just on fee income, fee income growth, which was stronger last year has been moderating for the last two quarters. And now we're barely at 10%. Is this merely a function of say, lesser credit card spend, maybe slower disbursal than personal loans? Or is there more to it?

Question: Suraj Das - Sundaram Mutual Fund - Analyst : I think few questions have already been answered. Just a follow-up. I think in the commentary, you mentioned that there are signs of sales that are building up in the CV segment. However, over if I look at the growth that is intact. In fact the growth has -- in this quarter 4% versus last quarter 3% on a QoQ basis. So just wanted to know if you can give some color in terms of the segments where you are growing or you are seeing pocket of opportunities and when and where this is looking to -- Is it kind of LCV, CV what kind of growth or is it become substantially (inaudible) I mean what kind of growth you are seeing in this book from this segment? If you can give some qualitative comment, that will be great.

Question: Parameswaran Subramanian - Nomura - Analyst : Most of them have been answered. But just this one on Prime, on Kotak Prime, you mentioned there is a pickup in the delinquency whereas on the secured assets of the bank, we are very comfortable. So what is driving this divergence in asset class.

Question: Parameswaran Subramanian - Nomura - Analyst : Okay. Fair enough. And in the last quarter, we had made a comment saying that we expect credit card and micro finance delinquencies to largely be absorbed within two quarters, largely -- are we holding on to that sort of guidance?