ICICI Bank, Kotak Bank Q2 Results: Analytic Views On These 2 Private Banks Earnings; Stocks In Focus

Two leading private sector banks, Kotak Mahindra Bank and ICICI Bank will be in focus on Monday's trading session as the share prices of these behemoths will react to their Q2 earnings which was announced last week. Both banks have recorded double-digit growth in both PAT and net interest income, while their asset quality continued to improve with sharp drops in gross NPA and net NPA.

Last week, on Friday, ICICI Bank shares ended at Rs 932.45 apiece, down by 0.28% on BSE. The bank is the second largest bank in terms of market and its m-cap stood over Rs 6.53 lakh crore on October 20th.

On the contrary, Kotak Bank shares ended at Rs 1769.55 apiece, up by 1.80% with a market cap of over Rs 3.51 lakh crore.

The two banks declared their Q2FY24 earnings on October 21st.

Here's what investors need to know:

Kotak Mahindra Bank Q2 Results:

Q2FY24 PAT stood at Rs 3,191 crore of the bank, rising by 24% YoY, while net interest income (NII) surged by 23% YoY to Rs 6,297 crore. Net interest margins (NIM) stood at 5.22% in the quarter.

As of September 30, 2023, the bank's GNPA was 1.72% & NNPA was 0.37% (GNPA was 2.08% & NNPA was 0.55% at September 30, 2022). The provision coverage ratio stood at 79.1%.

Also, in Q1FY24, the total advances zoomed by 21% YoY to Rs 3,57,012 crore, while customer assets which comprise Advances (incl. IBPC & BRDS) and Credit Substitutes, increased by 18% YoY to Rs 3,80,412 crore.

Further, in the case of deposits, average Current deposits grew to Rs 58,351 crore for Q2FY24 compared to Rs 53,971 crore for Q2FY23 up 8%. Average Savings deposits stood at Rs 121,967 crore as of September 30, 2023 (Rs 122,595 crore as of September 30, 2022). Average Term deposit up 47% from Rs 139,871 crore for Q2FY23 to Rs 205,632 crore for Q2FY24.

Shreyansh Shah, Research Analyst, StoxBox said, "The Mumbai headquartered leading private lender Kotak Mahindra Bank reported a decent set of numbers in Q2FY24 with net profit marginally ahead of the market expectations and posting double-digit growth on a YoY basis. The bank continues its historical trend of being stringent regarding its asset quality. This was reflected in NPAs declining and pre-emptively accounting for additional provisioning."

As expected, Shah added, "There was NIM compression, and we feel that Kotak Mahindra Bank will have an extra pinch regarding NIM compression in the forthcoming quarters as well."

Moreover, the analyst explained that due to intense competition amongst the key players to acquire low-cost savings deposits, the bank faced the brunt and saw a decline in its addition of savings deposits this quarter. However, the bank's strategic focus on microfinancing, which grew by almost 80% on a YoY basis, will help to generate significant profits in absolute terms and reduce the sharp impact on NIMs. This can be seen with its newly acquired Sonata Finance. However, uncertainty over Uday Kotak's successor will make us watchful of the bank's roadmap going forward.

ICICI Bank Q2 Result:

During the September 2023 quarter, the bank's profit after tax grew by 35.8% year-on-year to Rs 10,261 crore. Also, the net interest income (NII) increased by 23.8% year-on-year to Rs 18,308 crore, while the net interest margin was 4.53% in Q2-2024 compared to 4.31% in Q2-2023 and 4.78% in Q1-2024.

Meanwhile, provisions (excluding tax provision) were ₹ 583 crore in Q2-2024 compared to ₹ 1,644 crore (US$ 198 million) in Q2-2023.

In terms of asset quality, the gross NPA ratio declined to 2.48% at September 30, 2023, from 2.76% at June 30, 2023. The net NPA ratio declined to 0.43% on September 30, 2023, from 0.48% on June 30, 2023, and 0.61% at September 30, 2022.

Under the loan book, the net domestic advances grew by 19.3% year-on-year and 4.8% sequentially on September 30, 2023. The retail loan portfolio grew by 21.4% year-on-year and 5.5% sequentially and comprised 54.3% of the total loan portfolio at September 30, 2023.

In regards to deposits, total period-end deposits increased by 18.8% year-on-year and 4.5% sequentially to Rs 12,94,742 crore on September 30, 2023. Period-end-term deposits increased by 31.8% year-on-year and 9.2% sequentially to Rs 7,67,112 crore in Q2FY24. Average current account deposits increased by 14.0% year-on-year in Q2-2024. Average savings account deposits increased by 4.5% year-on-year in Q2-2024.

On ICICI Bank's earnings, Stoxbox analyst said, India's second-largest private sector bank, ICICI Bank, reported impressive Q2FY24 results, beating market estimates significantly. Although nominal NIM compression was seen, this was absorbed by fee income, which the bank generated and exceeded the profit estimation. Though there was some impact on the bank's profitability due to treasury loss of Rs. 85 crores, similar to Q2FY23, the healthy net interest income could absorb it, thus showing healthy total income.

Further, Shah said, that due to its prudent provisioning policy, the bank's provision decreased significantly as it had lower slippages. The bank has a well-calibrated risk framework that helped it sustain a healthy asset quality. It is worth noting that through its aggressive focus on the adoption of digitisation, the bank activated more than one crore non-ICICI Bank account holders at the end of September 2023 through iMobile Pay.

Going forward, Shah added, "We feel that the bank's focus on rural lending with the opportunity of cross-selling the products through a vast network of branches & ATMs, and cash recycling machines will help the bank to continue reporting solid profits going forward. With RoA in Q2FY24 standing at 2.41% (annualised), which is in the range of 2.3-2.5% as guided by the bank's management, we are confident that the bank will grow double-digit and are optimistic about the bank."

Disclaimer:

The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.