Two leading private banks, Kotak Mahindra Bank and Yes Bank will on Saturday announce their earnings for the third quarter ending December 31, 2022 (Q3FY23). In Q3, Yes Bank’s gross loan book is expected to remain muted due to NPA transfers to ARCs, in contrast, Kotak Bank is expected to post strong credit growth. Notably, both the banks have been factored in reporting a decline in their non-performing assets (NPAs). The share prices of these two banks were under pressure on Friday ahead of the third quarter results.
on BSE, yes bank stock expired 19.80 each, down 1.74%. Also, the stock of Kotak Bank closed with a slight decline. 1,763.25 on Friday.
In the second quarter of the current financial year, Yes Bank posted a net profit 153 cr vs 311 crore in Q1FY23, down 50.80% sequentially. Yes Bank’s net profit decreased by 32.20 percent 225 crore in Q2FY22. Profitability was under pressure due to acceleration in provisioning. were on the provisions of the bank against 583 crores 377 crore in Q2FY22. net income rose though 2,290 cr to 2,911 cr in Q2FY22.
On the other hand, in Q2FY23, Kotak Bank registered a 27% increase in net profit of 2,580.68 crores. While net interest income grew by 26% 5,099 crores. Gross NPAs to decline from 2.24% to 2.08% in the June 2022 quarter and 3.19% in the September 2021 quarter. Net interest margin (NIM) stood at 5.17% in Q2FY23 as against 4.4% in the year-ago period.
What to expect from both these banks in Q3 FY23?
Yes Bank Q3FY23 Preview:
According to MK Global, Yes Bank’s gross loan growth may see a decline Q3FY23 Reasons for NPA transfer to ARC. Notably, fewer LLPs should aid profitability. Slippages to remain high, but transfer of NPAs to ARCs should bring down NPAs meaningfully.
In its preview note, Kotak Institutional Equities said, “We expect NII to grow ~13% annually, reflecting underlying business growth. Business momentum is gaining traction in the retail and MSME segments, but the overall lending The growth is lower than the industry average of 12% YoY. Deposit growth of 16% is comfortably meeting the business requirements. We expect NIM qoq to be ~2.5% (stable QoQ). Revenue growth under high pressure will remain, especially led by weaker Treasury yields.”
Further, the brokerage said, “We will now see a sharp reduction in the gross and net NPL ratio with the transfer of NPLs to JC Flowers ARC (there is no earnings impact with this transaction). Near-term growth looks comfortable as the bank raised the desired capital through preferential placement. The bank is expected to highlight that all issues relating to the previous round are now complete.”
Kotak Bank Q3FY23 Preview:
MK expects Kotak Bank’s margin to be lower QoQ, but strong credit growth and lower other income base due to huge treasury losses last year should boost PPOP growth. Slippage to remain flat in 2Q.
ICICI Direct in its note said that during Q3FY23, Kotak Mahindra Bank is expected to report strong growth in advances at 22.5% YoY, up from 5.4% QoQ. 3.09 lakh crore while deposits are expected to grow 12.5% YoY, 5.6% QoQ 3.43 lakh crore. The CASA ratio is seen to be stable at ~56% deposits. NII estimated to grow 24.2% YoY 5,383 crore while NIM at 5.3% is expected to improve by ~13 bps QoQ. A slight improvement in the C/I ratio can be seen in Q3FY23 (CI being at ~48.5%). Thus far, the brokerage expects earnings growth of 26.6% YoY, 4.6% QoQ 2,699 crores. GNPA is expected to increase by ~13 bps QoQ to 1.95% on the back of improvement in the retail segment.
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