Kotak Mahindra Bank Q4 FY26 Earnings Call | Kotak Mahindra Bank Q4FY26 Earnings Concall

Added: 2026-05-10

[00:00:00]Thank you so much. Uh good evening everyone and thank you so much for joining us. I'm joined in the room with uh Dewang uh our CFO and the other whole time directors uh Jedi uh Partosh and Anup. Uh as we do each time I'll begin with a few opening remarks following which my colleagues will walk you through the financials and the operating performance in detail. There are two things that I'd really like to talk to you about today. number one the macroeconomic geopolitical environment and the implications it has across the group and number two the progress that we are making on the core business. Let me start with the macroeconomic environment.

[00:00:44]In addition to all the headwinds of the previous quarter, Russia Ukraine war, US tariffs, FBI outflows, this quarter saw enhanced volatility due to the West Asia crisis. The straight of almost has become a significant choke point for India. This has created disruptions in supply chain, significantly increased price of oil and gas and put pressure on the rupee. On the flip side, India's for forex reserves are strong. Corporate balance sheets are resilient and the Indian consumer continues to stay invested. But all of this is going to have an impact particularly on the inflation front. The extent of impact is clearly a function of how long this continues. In the bank, business activity continues as normal and till date we have seen absolutely no sign of any credit stress. In fact, the last quarter was an excellent quarter both from a credit cost and slippages perspective. The year- end volatility in the equity and bond markets had an MTM impact across the group. We did see muted activity in our investment bank and continued FBI selling affected our institutional equities and custody businesses while the domestic investment flows supported our asset management, alternate assets and retail brokerage businesses. In this context, we are taking a watchful stance monitoring leading indicators particularly at the lower end of the spectrum and potential second and third order effects. We are also conscious of the potential impact of a projected lower than normal monsoon cycle this year.

[00:02:32]Now let me move to the progress that we've been making in the core operating business. As I've been highlighting over the last few quarters, playing to the group strengths, we had identified four key customer segments for whom we would build differentiated propositions. We also run certain businesses as product verticals and today we will share with you the progress that we have made against each of these segments.

[00:03:00]To support this over the last year we launched our mother group brand campaign to other proposition specific campaigns to reinforce the uniqueness and differentiation on an overall basis in the bank. we delivered here on your growth of 16.2% in average net advances and 14.9% in average deposits. This growth is in line with our stated philosophy of responsibly growing our advances in the range of 1 and a half to two times nominal GDP growth. Our discipline was reflected in the Q4 results with healthy NIMS at 4.67% 67% significantly improved credit cost at 39 basis points and controlled expense growth with cost to assets showing an improvement of a of 36 basis points on a year-to-year basis. On a Y basis, Q4 PAT is up 13% in the bank and 6% on a consolidated basis. Book value per share grew by 15% on a year-on-year basis. Our objective remains to transform the franchise for scale while building a responsible well-government bank which generates return of equity in the high teens uh added with a couple of points of roe from the subs. With that let me hand you over to Dwang to take you through the financials. Good evening friends. Thank you Ashok. Uh let me take you through the key highlights of the bank's standalone and consolidated performance uh for quarter as well as uh this being a full year. Starting with the balance sheet of the bank uh bank's balance sheet grew 13% yi with net advances growing at 16%.

[00:04:54]Advances growth from EOP and average business has been consistent at around 15% throughout the year. uh this quarterme and mortgage business continued to be key driver growing y over 18%.

[00:05:11]Unsecured retail portfolio started showing gradual growth in absolute terms for Q4 which was 1,200 crores as against 517 crores for Q3. uh unsecured bicks in net advances has remained stable at 8.9% for last two quarters despite overall book growing at 16%. Q advances got impacted by slower growth in corporate banking book. On the liability side, the total deposit grew at 15% YI led by strong traction in lowc cost granular deposits. Current account and fixed rate saving account grew Y 23% and 18% respectively taking the CASA ratio to 43.3% as at 31st March 2026.

[00:06:03]During the year we reduced our reliance on high cost floating rate saving account which reduced by 30% on a Y basis. The term deposit growth was at 14% on a Y basis. During the quarter, average current account and fixed rate S account grew 18% and 17% respectively on a Y basis and the average term deposit growth was 16%.

[00:06:32]We continue to maintain comfortable CD ratio of 86.6% as at 31st March. On 31st March, the bank's net worth stood at 1 lak 35,199 crores. This includes 8,18 cr of mark to market gain on investments which are directly accounted in AFS reserves without grouping it through the profit and loss account. ROE for the quarter is 12.27% and for the full year is 11.08%. 08% on total net worth including the AFS reserve as mentioned above capital position remains strong at the stand alone bank level the capital adequacy ratio is at 22.4% of which C1 itself is 21.3%.

[00:07:29]The board has recommended increased dividend of 65 per share. This is on the 1 rupee share after the subdivision uh with dividend payout ratio of 4.62%.

[00:07:42]Now let me come to the income statement and let me start with the quarter performance. This quarter shows profit before tax growth of 17% on Q as well as YI basis. Q4 performance was driven by NI growth of 4% and significant improvement in credit cost which reduced from 63 bips in Q3 to 39 bips in quarter 4 mean for the quarter is 4.67% 67% as against 4.54% for Q3. As you know Q4 always have the anomality of the number of days. So if I adjust the benefit from lesser number of days, the Q4 uh minim uh remains same as Q3 which is about 4.54%.

[00:08:32]Despite full quarter impact of 25 BIPS repo cut which you know happened during December.

[00:08:40]So this quarter actually saw normalization in name as a effect of refocus during the year got offset by repricing of deposits as well as continuing growth in lowc cost granular deposits.

[00:08:54]Free income for the quarter grew at 9% sequentially and growth was contributed mainly by distribution income and general banking fees. Other income for quarter 4 uh includes uh loss on account of unwinding of NDF positions. Coming to the cost, staff cost for the quarter reduced by 100 cr in retired benefits due to increase in the discounting rate.

[00:09:20]Q3 staff cost as you know was higher by 96 cr provision on account of the new labor code which was introduced from November 95.

[00:09:32]actual payroll cost without this above retireal uh movements actually remained flat on a quarteron quarter basis. Other operating expenditure for Q4 3,76 crores up 11% Q mainly due to higher marketing spend towards brand and awareness campaign plus uptick in the acquisition related cost during Q4.

[00:10:00]On asset quality parameters, we improved all parameters across during Q4 with lower slippage and with improved collection efficiency in granular retail segments particularly in retail CV, MFY and credit card business. The gross NPA is at 1.2 versus 1.3 in December. Net NPA.25 25 versus 31 in December quarter with the provision coverage ratio now over 79% at 31st March. Credit cost for Q4 at 39 bips versus 63 bips last quarter and sleepages at,8 crores visav 1,605 crores last quarter showing significant improvement due to reduction in delinquencies. secured book continues to have negligible delinquencies.

[00:10:57]All this uh improvement are on account of collection of retail granular uh accounts. We did not had any uh sign any any corporate lumpy collections or recovery during the quarter. ROA for the Q4 improved to 2.14% with normalization mean and improvement in credit cost. Let me summarize now the full year performance. A full year 26 saw a total repo cut of 100 basis points during the year. This resulted in reduction in interest income which bank partially mitigated by reducing cost of fund through SA interest rate cut and mobilization of lowc cost deposits.

[00:11:40]Fully year for the FI26 is 4.6 against 4.96% corresponding last year. Whereas cost of fund for FI26 was reduced to 4.67% from 5.10% for FI25.

[00:11:57]Non-interest income as a percentage of total income is marginally lower in FI26.

[00:12:03]While distribution income grew, the overall fee income growth was affected by muted credit card business growth as card issuance activity resumed after last year's embargo. Total opex grew by 4% and we continue to invest in technology with tax spend for the full year at about 13% of the total opex. Our cost to assets for FI26 reduced to 2.75% as against 3.02% for FI25 down by 27 pips.

[00:12:40]Credit cost during the FI26 progressively reduce each quarter starting with 93 bips in quarter 1 with 79 bips in quarter 2, quarter 3 of 63 bips and now at quarter 4 of 39 bips.

[00:12:56]ROA for uh the year is 1.97 as against 2.21% for the full year.

[00:13:06]uh while I will cover the overall consolidated performance, Deb will take up select subsidiaries performance later. Overall, our consolidated customer assets are at 6 lakh 16,000 crores and the AUM managed by group is now at 7 lak 47,000 cr which grew 15% YI and 12% YI respectively.

[00:13:30]Equity A1 of Kotak Mahindra asset management company was impacted by adverse movement in capital equity market in the month of March. The consolidated network now is at 1 lak 81,000 crores with the book value of share at 182 which grew at 15% on a Y basis. Our capital adequacy continued to remain healthy at group level at 23% with C itself of 22%.

[00:14:00]ROE at the consolidated level stood 11.92% for Q4 and ROA for the quarter is 2.18%.

[00:14:10]Q426 consolidated path is 5,238 crores. This excludes exceptional gain on disinvestment in infila and it grew 6% from 4924 crores in quarter 3 of 26. Quarter four of 26 for subsidiaries were impacted by adverse movement in equity capital market and GC yield uh due to the MTM uh losses on the price movement during the Q4. Kotak Mahindra Capital Company sold his 30% stake in his associate Infina Finance Limited resulting in profit after tax of 1,094 crores in the standalone book. However, since it was also a company of uh at the at the consolidated level, the pat on this business investment is 185 cr after considering the carrying value of infina in the console books. Post tax sale infina ceases to be associated with effect from 24th March 2026.

[00:15:17]Consolidated profit for the full year is 19,103 crores versus 19,113 cr or 25 excluding the above gains on stake sale. With this I hand over to Anu to take you through the highlights of the retail businesses.

[00:15:36]>> Thank you. Uh and good evening. Uh Dwang has covered the financial performance for the year. I will now provide update on the retail business. Our retail strategy is anchored around two focus segments. The HNI affluent and the core India with a strong focus on life cycle engagement across deposits advances supported by groupwide products and services. Our high network proposition comprises of private bank and the solitire program. The private bank manages the wealth of around 60% of India's top 100 families while Kotak soler continues to gain traction by deepening affluent relationship across banking investments and lifestyle offering driving a superior revenue mix.

[00:16:31]We have been awarded India's best private bank by 2026 by Euromoney.

[00:16:37]The combined relationship value across the bank and the group representing advances, deposits, demand and investment holdings of private bank and solitaire families stood at 10.8 lakh cr contributing contributed by 66,000 families as of 31st March 2026.

[00:17:02]Brand recall for affluent segment remains very strong for Kota for core India the other engine for us the Kota 811 proposition continues to scale well adding 250 to 300,000 accounts customers every month digital first model enables low cost acquisition low cost servicing while delivering stable granular lowc cost savings deposit The quarter 811 savings account now contribute to 12.2% of total savings account growth which grew 32% YI and 8% quarteron quarter. The 811 app continues to be ranked among the top banking apps in India. At a franchise level, average deposit grew at 14.9% YI and 2.3% quarteron quarter in quarter 4 FI26.

[00:18:08]On the retail side, current account strategy remains focused on self-employed individuals and business owners. A longstanding strength for the bank lending relationship acrossme business banking and lab continues to support acquisition and engagement sustaining momentum through quarter 4 of fi26 at an overall bank level average current account balances grew 18% yi per quarter the saving franchise delivered steady growth with Average savings balance increasing 10% YI driven largely by balance accretion from existing customers reflecting [clears throat] strong customer engagement. The average term deposit balances due 16% YI with continued emphasis on building a granular and durable franchise. As a result, the CASA ratio remained resilient at 43.3% as of 31st March 2026. Moving to retail advances growth in quarter 4 was led by secured businesses such as mortgages, tractor finance, gold loan. Unsecured businesses including personal loan, business loan, retail, micro credit recorded sequential growth. The credit card portfolio remained flat sequentially. Unsecured retail advances constitutes 8.9% of net advances. Within secured businesses, the mortgage portfolio across home loan lab 18% and 4% by Q.

[00:19:58]The strategy remains focused on affluent self-employed customers to deepen wallet share and drive deposit cross-ell.

[00:20:07]Tractor industry volumes moving to tractor industry volume remained strong with 35% YI growth and 23% YI growth for FI26 driven by GST cut subsidy support and adequate rainfall and replacement demand while reservers carry over support near-term prospect IMD below normal monsoon forecast for FI27 due to El Nino adds to some uncertain ities. While our disbbursement growth traded industry tails in quarter, we retained our industry leading market position as the second largest tractor financer in the country with 10.9% market share for FI2526.

[00:20:54]Collection efficiencies improved during the quarter and is expected to remain supportive into quarter 1 FI27 aided by harvest cash flow. Gold loan remains a small portfolio but delivered a strong YI growth and represents a key area of focus with plan to scale up over next 18 to 24 months. Secured asset growth was supported by robust demand, disciplined underwriting and superior credit evaluation with stable asset quality within unsecured lending.

[00:21:31]Business loan growth remained steady with continued focus on portfolio quality. Personal loan balances grew sequentially driven by salaried customers and expanded digital origination journey. Credit performance remained stable supported by tighter underwriting and datadriven analytics and stronger risk controls. Disbburments were largely to existing customers while the standard charter personal loan portfolio which we had bought continued to run down. Credit cards remains a key driver of customer stickiness and engagement. The portfolio has been fully restacked through launches such as solitire air plus and air and cashback plus delivering segment specific band value proposition. Solier continues to scale in the HNI segment while Air Plus and Cashback Plus are gaining traction in emerging and mass segment reinforcing the right product to right customer. Strategy enhanced by our data models and analytics. This along with moderating delinquencies, better collection and stronger risk model drove sequential improvement in the portfolio quality. Moving to microfen, the industry advances declined 16% between March 25 to December 25 with a gradual recovery expected in FI27. Our retail micro credit due 8% quarteron quarter in Q4 driven by new customer dispersement.

[00:23:10]Portfolio originated using our risk-based underwriting model continues to demonstrate strong performance supporting expectation of further improvement in portfolio quality.

[00:23:22]Overall unsecured portfolio improved sequentially in Q4 supported by healthier flow rate and improved collection efficiency. We however remain watchful and continue to invest in adequate collection capacity.

[00:23:38]Investments made over past past few years in technology at overall level across retail businesses are now started yielding benefits through lower acquisition cost lower servicing cost and reduced brand congestion and improved service level. In summary, our customercentric approach is enabling seamless linkages of savings, investments, insurance and credit across Kota ecosystem. Our focus continues to remain on calibrated growth, portfolio resilence and proactive risk management.

[00:24:17]We continue to closely monitor potential second order impact from global geopolitical developments and Elnino related risk to rural income while maintaining a disciplined data risk approach. Uh I will now hand it over to Partosh. Thank you Anu. Good evening friends. We have identified and institutional as our key focus segments to drive growth while leveraging the group's conglomerate structure. The theme franchise book which accounts for 24% of the bank's advances anchors the primary banking relationships and delivers scalable balance sheet growth with portfolio diversification.

[00:24:57]The institutional segment enables capital efficient profitable growth through an integrated wallet approach led by fee based and advisorydriven business businesses yielding higher roe.

[00:25:09]The corporate bank contributes 17% of the bank's total fee income growing at 14% YI cross-selling of investment banking and institutional brokerages products add about 200 basis points to our corporate banking roe.

[00:25:25]The commercial vehicle and construction equipment segment is managed as an independent product business within the bank that complements our theme businesses and extends our reach into semi- urban and rural markets across logistics and infrastructure ecosystem.

[00:25:41]We are among the top five financials in the country in this space with a market share of 5% in CV and 8% in C segment respectively.

[00:25:51]The CVC booked at about 46,000 cr up 7% Y and 3% quarteron quarter and forms 9% of total advances. The propositionled approach is translating into deeper engagement and higher volume share. Now let me take you through the franchise in more detail. On the institutional side, this quarter corporate advances grew 22% YI while being flat sequentially. The credit substitute book declined 6% Y but increased 3% sequentially. Growth continues to be driven by granular expansion the mid-market vertical supported by new customer acquisitions.

[00:26:31]The book remains well diversified driven by working capital and flow-based business and strong cross-ell potential.

[00:26:38]In large corporates, we continue to focus more on flowled businesses and profitability through higher cross-ell and deeper transaction banking penetration. The trade book showed strong growth. Focus remains on client onboarding, deeper penetration and digitization. Eway Go, our digital supply chain platform is scaling steadily on strong market adoption. Gift City continues to be an important growth lever for the franchise, unlocking multiple opportunities. The portfolio has shown strong year-on-year growth.

[00:27:10]Asset quality across customer segments continues to be robust. Beyond balance sheet growth, our focus is on improving returns through feed and capital light businesses. Bet capital markets delivered strong volume growth and with banks now permitted to participate in acquisition financing, the addressible opportunity is expanding for us.

[00:27:32]Collection and payment flows continue to grow supported by technology investments and new CMS mandates including from BFSI and e-commerce clients. The payments and collection stack was upgraded improving speed, scalability and customer experience. The capital market businesses had a muted quarter with the impact seen across investment banking, institutional brokerage and custody largely reflecting FIA outflows and an overhang on the markets due to the geopolitical tensions. We continue to maintain our leadership position across all these businesses. Now moving on to the theme franchise. At its core, KOTC is an bank.

[00:28:15]We have a comprehensive relationship business proposition across corporate SME, business banking and agreememes segment. We are driving scalable growth through transactions flow and fee based revenues. The portfolio remains diversified, granular and pan India.

[00:28:32]Total SN advances book of about 1.2 2 lakh cr grew 19% y and 5% quarteron quartarter in corporate theme we sustained momentum in new business origination while maintaining stable spreads this quarter book grew 17% y and 5% quarter on quarter in business banking demand for working capital remained healthy across sectors the secured portfolio grew 24% y and 5% quarter on quarter the agreeme business also delivered growth of 15% Y and 6% quarteronquarter driven by cross-ell and higher fee income through holistic customer engagement. This business is a specialized vertical that also supports our private sector objective. We follow a cluster-led strategy to drive deeper penetration and sustained NTB acquisitions across theme businesses.

[00:29:24]Asset quality continues to remain resilient, supported by disciplined underwriting and proactive portfolio management. Investments in coverage, process simplification and technology have improved turnaround time, engagement and scalability. The house bank approach continues to enable crossill across the bank and the kota group.

[00:29:46]Now moving to commercial vehicle and construction equipment businesses. The commercial vehicle industry saw strong momentum in Q426 with 19% Y and 12% quarteronquarter growth resulting in 13% Y growth for FI26 driven by GST reduction and demand acceleration ahead of OEM price hike from April of 2026. We continue to maintain our overall market position with an appropriate customer segment mix ranging from fleet operators to retail. Stress in the retail segment has begun to ease with recent vintages showing improved delinquency trends supported by tightened underwriting and strengthened corrections. The construction equipment industry declined 18% Y in Q4 and 8% for FI26 due to slower infrastructure execution, tight state finances, muted project awards, extended monsoon and raw material shortages amid geopolitical disruptions.

[00:30:47]While institutional and midsize contractors remain resilient, liquidity is constrained for smaller contractors and first-time users. Industry recovery will depend on faster project awards, improved raw material availability, and a pick up in government spending.

[00:31:01]In this environment, our dispersements broadly track industry trend while maintaining market position. We will continue to pursue opportunities in the CVC space through calibrated riskled interventions while closely monitoring the impact of geopolitical developments on economic growth and segment performance across all our businesses.

[00:31:22]We continue to invest in technology offerings. We have enhanced functionalities on our unified enterprise portal FIN which is seeing good customer adoption both for transactions and servicing. Our one-click working capital dispersals are being well received across corporates and theme customers. I will now hand over to Jade.

[00:31:45]Thank you. Good evening all. Uh let me talk about our group companies now. In Q426, our subsidiaries reported pat of 1215 crores contributing 23% of consolidated profits for the quarter.

[00:31:59]This was against 1,453 crores in Q3 of FI26 and 1382 crores in Q4 of FI25. The Q4 PAT was impacted by negative MTF on capital market linked equity investment and movement in yields in March 26. The power of our conglomerate model exemplified through focus propositions designed for the customer. As highlighted by Parto earlier, the bank as well as subsidiaries support the distribution of various products and services manufactured by the group thereby strengthening our one quarter strategy. I will take you through the performance of of subsidiaries.

[00:32:36]announced. Starting with the lending subsidiaries, COD's prime customer assets grew to 44,933 crores, up 12% YI and 4% Q with a pat for Q426 being at 240 crores. Again, 250 crores in Q3 of FI26. The quarter was negatively impacted by 68 crores on account of MTM on OIS due to movement in yield.

[00:33:00]Turning to the capital market businesses, a key strategic move this quarter has been rebranding of quoted securities's retail business as quoted NEO to reflect the power of a bank supported trading platform with unique features such as seamlessly money transfer through one-click deposits and instant withdrawals to a lead codic bank account. We also launched NEO trading account opening journeys on KOTC 811 app and opening of KODC bank savings account journey on the NEO app. Our overall market share increased to 13.5% from 12% on a YI basis and MTF market share is now at 14% driven by strong pricing and product edge. Code of securities Q426 pack was at 400 crores up 15% YI with 7% down sequentially on account of negative MPM as mentioned earlier for capital markets. FI26 was a challenging year with subdued FBI activity in both cash and derivative segments. However, our institutional equity business KIE and the investment banking business KMCC have continued to maintain leadership position in their respective segments. Turning to the asset management business, despite market volatility, KOTKMC's scale has continued to translate into strong cost efficiency and operating leverage supporting healthy margins and steady profitability through the cycles.

[00:34:17]The average assets under management of coding mutual fund for the FI2526 was 5.7 lakh cr up 22% y the full year pat grew at 11% over FI25 court of alternate asset managers one of the largest domestic alternate asset managers in India with total funds raised since inception of approximately USD 11.5 billion with up to 15% of the commitment coming from the deployment of excess capital of the group while targeting high teams IRRa across strategy This quarter cotic yield and growth fund KYF raised 4,400 crores approximately with cotic private bank acting as a sole distributor underscoring our distribution strength and in-house capabilities of manufacturer. We successfully portfolio exits which are reflected in commerce profitability with FI26 PAT of 292 crores versus 139 crores in FI25.

[00:35:12]Talking about life insurance in coded life insurance the gross written premium grew 16.7% Y in FI26 reflecting good momentum value of new business VNB grew 31.4% 4% Y in FI26 showing quality of the business mix. VND margin expanded by 350 basis points to 28.5% driven by a higher share of protection and nonparticipation savings products.

[00:35:38]Embedded value increased by 9% Y and it is at 19,224 crores. Currently operating ROV for FI26 was at 16.4% underscoring steady operating performance and capital efficiency.

[00:35:53]Year-over-year compatibility is impacted by GST related regulatory changes absorbed during the year.

[00:36:00]Finally, in furtherance to compliance with the RBI regulatory directions issued in December 25, we undertook two actions. We reduced the ownership in Afina, which now ceases to be an associate of the group. With regard to our subsidiary KMIL for operational simplification, the business activities of KMI will now be conducted within the bank effective first April. In conclusion, our key strength is the seamless integration of our in-house financial products with the bank's distribution, relationships, and digital platforms, enabling customers to access a comprehensive suit of solutions through one unified ecosystem. With full ownership and alignment across the group, we're well positioned to capture evolving customer needs and market opportunities. I'll now request the operator to begin the query session.

[00:36:45]>> Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone.

[00:36:56]If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to please use handsets while asking a question and to limit your questions to two per person. You may rejoin the queue if you have any further questions.

[00:37:12]Ladies and gentlemen, we will now wait for a moment while the question queue assembles.

[00:37:41]Our first question comes from the line of Kunal Sha from Cityroup. Please go ahead.

[00:37:48]>> [clears throat] >> Yeah. Uh hi, thanks for taking the question. So firstly wanted to understand the NIM outlook and particularly uh our rate action. Uh we have raised uh TD rates and we are almost 30 basis points uh higher than the peers. Now the pig deposit rates are at 6.8. uh so what is uh the thinking behind that in terms of uh uh maybe increasing the uh rates and uh given this scenario maybe what would be the outlook on names. So that's the first question. Uh secondly on unsecured we have been flat on a quarteronquarter basis in terms of the proportion. So should we now expect uh the growth uh to pick up in line with the or maybe better than the overall advances growth and the proportion to inchar and on corporate many of the players are participating uh uh in the corporate lending uh and they are indicating that rarok is still holding on but we have not seen uh that much of growth coming through in the corporate lending. So what is leading to a relatively slower growth than the peers on the corporate side? We not participating very actively out there.

[00:38:56]Yeah. Thanks.

[00:38:58]>> Hey Kunal, thanks. Let me cover the deposits and unsecured retail piece and maybe parto you can cover the corporate one. Uh look on the deposit side it is a function of putting many many propositions out and many many segments that we are going after. So on the one hand you have something like 811 uh which as Anup kind of mentioned uh is already nearly 13% of all our total SAR book growing at about 32% uh perom right that's low cost granular deposits at the higher rate the 6.8% to 8% rate is more targeted towards more targeted towards uh the senior citizen kind of segment and uh positioning our book uh for the future.

[00:39:44]So we are seeing how that kind of goes and then we will adjust over over a period of time on the unsecured retail like I've been mentioning Kunal for the last couple of quarters in the first >> sorry just on uh just on this TD then outlook on margins would be should we see the pressure going forward because we have raised the TD and there won't be any uh maybe obviously on the yield side not very sure if there is too much of benefit that flows in so deposit repricing would also be over and we are raising the rates. So would there be pressure in margins on maybe pressure on margins in FI27?

[00:40:21]>> So Kal hi Dang here. So the if you have seen the T rates which we are increasing are for the longer duration. So the the effect of the increase in the T rate in the cost of fund and then impacting NE will be gradual. It will be uh and you know if if I look at it uh in the current year the name drop was close to 36 bits. So we expect on the uh NIM will be reducing next year but the rate of reduction will be much lesser and far more gradual uh as I explained uh based on the tenure profile of the TD. Yeah.

[00:40:56]And also remember at the same time we are growing also the KA and Sabuk growth which has picked up if you have seen in the last two quarters. Right. So we expect some of them also to offset the increase in the rate of trading. Yeah.

[00:41:10]Sorry. Yeah. on the unsecured retail kunal uh like I've been mentioning last couple of quarters uh we've stabilized the businesses uh and we have four businesses under that right we have PL cards uh business loan and MFI MFI we are back to dispersements and that kind of business is actually growing uh quite nicely quarteron quarter MFI grew about 8% uh right uh business loans has also grown uh quite nicely. Uh PL is picking up traction and doing quite well. Cards has been flat uh quarteron quarter. Uh and you know we've got the whole product stack now in place and now it's a matter of pushing through momentum like I've mentioned for about the last two quarters that in the first instance we will be looking for growth on a rupee cris and then on a percentage basis. I'm not going to hold back secured growth just to get a better unsecured ratio. This is about each business doing the right thing for it and the ratio is a kind of fallout. So unsecured as a whole Q through Q3 grew about 560 odd crores and Q4 grew about 1,200 crores and that kind of momentum we'll continue to see. Now having said that obviously the West Asian crisis is something that we are monitoring very very very closely. Like I said I'm seeing no stress right now. Uh but clearly the bottom end is the first area that gets affected. So some level of tightening at the bottom end uh we have done to make sure that we don't uh uh you know face any kind of credit issues going forward.

[00:43:02]on the corporate side.

[00:43:03]>> Yeah. Uh Kunal hay partoh uh kunal we grew corporate uh banking book by 22% yearonear on Q4 we did not grow the book because as you know in the March uh month the short-term uh interest rates uh go up substantially high and uh what we did was if the uh because the short-term uh lending book that we carry as part of the wholesale business there we were not really getting the right margin and hence we did not roll over that book and which is what is reflected in flat growth in the wholesale businesses in that quarter but that's more of a March phenomenon and which is normally uh every year we will we see similar situation but we continue to focus on wholesale businesses and that's a very strong franchise for us and we will continue to build that business going forward >> got it thank thanks and all the best yeah >> thank Thank you. Ladies and gentlemen, in order that the management is able to address questions from all participants in the queue, you are requested to please restrict yourselves to two questions only. You may rejoin the queue if you have any further questions.

[00:44:17]Our next question comes from the line of Abishek Mura from HSBC. Please go ahead.

[00:44:24]>> Yeah. Hi, thank you for taking my question. Uh so one question on the SA and uh Y number and I'm talking about averages. Uh so if I look at a Y number the numbers look good they are going up but if I look at QQ it's it's actually coming off and I guess the Y is also helped by a favorable base in 25. So my question is now to accelerate or reacelerate the S and TD growth do you think a rate uh deposit rate increase is needed apart from what you have already done? Uh the second question regarding the average current account is that directly correlated with corporate loan growth because uh every quarter where there's been a sharp growth we've seen a sort of increase on a sequential basis and this quarter it's become a little more uh soft and I'll just squeeze in a third one just in terms of ECL transition have you uh got an impact that you can share the transition impact and whether provisions will be higher on a run rate basis. basis after the transition. Yeah, these are my three questions.

[00:45:32]>> I'll take the third one.

[00:45:34]>> Yeah. So, hi, this is Anup here. Uh, as Ashoke spoke about, you know, at a aggregate level, if you look at the deposit uh YI there has been a very strong growth and uh you know it started off of course by we bringing down the SA rate and still growing. I think that's the important point to note that during the year we now our rates are similar to the other large player. Uh keep that in mind and with that we continue to grow our SA group very granularly uh grow driven by the uh the affluent and the uh high-end customers in terms of SA and also the core C 811 which is growing at a very very steady rate. uh if you know I I think as we spoke about the overall deposits uh you know it's it's it's a it's a mix of between looking at the affluent looking at the core and building the uh granularity around it and we are we are quite quite satisfied with the way that's progressing at the same time you know as we said about the TD and so on and so forth we want to build a slightly longer tenor TD so that you know because if you think about this whole TD you know it moves between a cycle of the uh floor and the ceiling and and we believe it's time to lock in is on the longer end of the curve on TD uh as our kasa is growing quite rock solid uh on the car part it has been a you know as as pitur also spoke about we're fundamentally very strong on self-employed so as as we provide our combined solution between advances, deposits and all the products. Uh we believe uh the strength is uh showing showing up quite well and whether it's wholesale or retail that's far more stickier for us. Uh that that would be my response to the overall CASA and the deposits.

[00:47:41]>> Anup I'll just add uh uh uh uh just one point on the Q4 car. See you we you would recall we keep uh talking about it in every quarterly investor call that as part of the wholesale business uh we have uh lot of uh our focus on transaction banking has been consistent and we've been growing our penetration with both uh theme retail and corporate customers on the cash management businesses which uh helps us uh increase the corporate and uh consumer bank uh current account car current account balances incrementally our capital market businesses get us lot of deal car so Q3 we had substantially large uh deal car sitting in the balance sheet on quarter end and hence Q4 car may look little uh muted but that's because of one large deal car sitting in Q3 >> uh let me take the ECL question uh I think uh yes finally the ECL guidelines are out and I think it is more or less same as the draft version. So based on the computation which we had done on the draft ECL guideline on 31st December uh the impact of the ECL uh on the net worth is about less than 2% uh and it's not material uh and given our capital uh pollution uh we don't uh expect uh on an ongoing basis as well uh the impact to be material on the ACL part >> two 2% of >> less than 2% of net worthet one time fact >> that is on the on the transition and then on ongoing basis also it's not but here >> okay got it thank you for thank you for the answer and all the best >> thank you our next question comes from the line of J Mundra with ICICI securities please go ahead >> yeah hi good evening sir two questions first on lim so Dwang if I heard you correctly you mentioned that yi may still have a downward bias. Uh but I was thinking that this year we had u you know the entire rapper rate transmission our unshare share of unsecured uh retail also declined uh quite meaningfully and going ahead now that that share has broadly stable at least in percentage terms and the raporate impact has already gone uh your SA which is a fixed uh plus floating uh those headwinds are also receding So um I mean apart from this what is it that that that could make the downward pressure on NIM? I was uh thinking that maybe your worst phase on NIM is probably over. Uh so what am I missing or uh uh or or if you would like to you know provide an outlook on the NIM?

[00:50:45]>> Yeah. So I think uh J as I said uh uh at 40 odd% of kasa my 60% is still the term deposit and the term deposit tenure for the current TD was about 9 to 12 months which we are now obviously elongating it uh as we go forward uh as explained by Anup and obviously we also increase the TD rate for that. So as I mentioned while yes the there will be a nim uh reduction but it'll be far far more gradual and lower than the current year.

[00:51:16]So to answer your question it is largely because of the TD rates uh which may uh slightly move up uh towards the second half of the year uh and therefore it will be gradual as well as uh uh lower than the current year. That's the answer to that. Yes, it will be offseted by obviously the uh increase in the uh unsecured buildup uh as well as the kasawa.

[00:51:39]>> Yeah.

[00:51:41]>> Sorry, you said first half, second half.

[00:51:42]Sorry, I missed that. Did you say >> second half of the year?

[00:51:50]>> No, sorry. What is second half of the year? It it will change the direction the new trajectory or how is it? So directionally the name as I said will gradually go down and the the reduction will uh be towards the second half of the year. That's what I'm saying.

[00:52:07]>> Okay. Secondly u sir on credit cost like this year we have reported around 65 basis point full year impact and this quarter slages have been phenomenally good less than 1%. And you've been mentioning that you know the drag from unsecured has been coming off. So um how to look at credit cost going ahead? Um because I believe as you mentioned that the ECL impact will be taken through network. Uh so I think uh u I mean ECL will not have any bearing on your FI27 credit cost I would believe. So how should look at one how should one look at credit cost for FI27.

[00:52:48]>> So uh I think let us look at the credit cost on a steady state basis without before ACL. So uh clearly uh the efficiency in the credit cost has come uh in the retail segment which is largely uh commercial vehicle retail uh micro finance personal loan credit card right so as we move forward we will obviously be continuing with our good work of uh increasing collection efficiency as well as tightening the underwriting norms. uh we remain watchful uh on the uh credit cost on the commercial retail business and some ruler business because there could be some seasonality which would have come in Q4. However, we are far more comfortable on the credit cost uh reduction on the MFI uh credit card and personal loan going forward.

[00:53:43]>> Thank you. Our next question comes from the line of Piran Engineer with CLSA.

[00:53:49]Please go ahead.

[00:53:51]>> Yeah. Hi team. Uh congrats on the strong set of numbers. Uh firstly just a clarification on this Nim thing. You're talking about full year FI27 versus full year FI26. Right.

[00:54:02]>> That's correct.

[00:54:02]>> Not versus exit FI26.

[00:54:06]>> No. No. That's correct.

[00:54:08]>> So versus FI26 it should be flattish.

[00:54:10]Right.

[00:54:12]As I said, it will be slightly it will be rangebound.

[00:54:16]>> Huh. Okay. Because I think people here are getting the impression that versus exit numbers uh it is going to go down.

[00:54:24]I think that's the uh message that got painted. But anyway, >> it is for a full year.

[00:54:30]>> Full year. Okay.

[00:54:32]>> It's for a full year. Yes.

[00:54:33]>> Got it. Okay. So, my first question is just from the business banking and corporate theme books where we've been growing quite fast. What are the average yields and credit costs now like in this business?

[00:54:45]>> Uh on uh we do not uh uh give the yields on the corporate book but uh we don't really have a uh any significant credit cost.

[00:54:56]>> Sorry.

[00:54:57]>> Yeah, I'm talking about corporate theme.

[00:54:59]uh there is uh very very uh low I would say very very small uh amount part of the book is in our SMA category and uh we have actually been recovering money uh from some of the old cases. So I would say as of now the book is absolutely clean.

[00:55:22]But uh okay my main question is is this a ROA kicker a NIM kicker or not these businesses?

[00:55:31]So we look at corporate theme as a ecosystem banking. We look at how we can uh provide uh banking to you know in addition to banking sell more products to them which is trade transaction banking uh you know take care of their exports remittances and also provide banking from our uh uh you know private banking to their families and etc. uh so on a overall basis we look at the uh roe for the customer on a holistic basis and on that front uh it it is working well for us.

[00:56:07]>> Understood. Uh the secondly our distribution fees were down y uh what has driven that?

[00:56:16]Well uh I think uh distribution fee largely includes uh the insurance uh premium and there was some impact of the uh commission income right? Yes sir. So that basically the impact there were some changes in the GST rates as well which you know which has happened. So that has also impacted the distribution of income.

[00:56:38]Got it. Got it. And just lastly one more theoretical question we if we acquire an 811 customer uh fully digitally uh now let's say he scales up over 3 four years has a decent deposit he'll become right with a relationship manager etc. >> Sorry sorry sorry I >> you lost your you lost your voice can you repeat please? Yeah. So just a conceptual question on how how you all classify 811 today. If I'm an 811 customer, I've joined you all digitally.

[00:57:14]3 4 years later I scale up. I have a balance of say 5 10 lakhs. I'll become a branch customer, right?

[00:57:22]>> And not one second. One second.

[00:57:25]>> One second. 811 is first of all the primary target market for 811 is core India. We acquire digitally. We service digitally and we cross-ell digitally. If a customer wants a different kind of account or wants to make investments or whatever, the customer can do it on the 811 app, no problem. But if the there's no question of taking a customer out of an 811 proposition and putting that customer into a branch proposition. If the customer wants an RM, yes, he can open an account in the branch. He'll get an RM and the RM will do everything that the branch wants. But as far as 811 is concerned, it's digital acquisition, digital servicing and digital crossell.

[00:58:09]>> And if I just add up Iran, you know, think about it as one engine is running on unit economics and the other is on value economics.

[00:58:20]>> Yeah. No, fair. That's why I thought that when the customer becomes more valuable, uh, you would want to have not just a digital relationship but also more personal relationship. No, it's a question of what the customer wants as opposed to what we want. If the customer wants a digital relationship, that's it.

[00:58:38]If he wants a uh a personal relationship, that too is available.

[00:58:44]>> Understood. Understood. And just lastly, uh you know, this year was a very strong year for tractors uh the OEMs, but we've not really participated in that growth.

[00:58:54]Uh so just why?

[00:58:57]So see on tractor we continue to remain a very large player. This is a business we have built over many many years. Uh we continue to uh we are the number two player here but in a competitive rates there are times where we don't want to buy business. So to that extent we have stayed focused on building it for long-term sustainability. uh and it's a it's a very strong focus for KOK and we are inherently very strong at it. Uh but we don't want to be price leaders here.

[00:59:32]>> Understood. Okay. Yeah. This is it from my end. Thanks and wish you all the best.

[00:59:37]>> Thank you.

[00:59:40]>> Thank you ladies and gentlemen. We request that you please restrict yourselves to one question only. Our next question comes from the line of Ankit Bihani with Nomira. Please go ahead.

[00:59:52]Yeah. Hi uh good evening uh the congrats on the quarter. So my first question is on LCR. So our LCR ratio has been running close to around about 135% and is well above peers who are comfortable at 115 to 120. So what is the need to keep this level of excess liquidity and wouldn't if you bring it down could provide some support to margins as well.

[01:00:13]And my second question is on Elon investments that seems again lower than peers largely on account of uh your GZ portfolio being skewed towards shorter 10 years. Why is the composition like this? Yeah, those are my two questions.

[01:00:27]Yeah.

[01:00:29]So LCR uh for the year end you are right it is looking higher but if I look at uh average LCR during the year uh it is around 120 12 uh3 sort of number so that's the first thing at the year end it is higher uh on the uh investment book uh yes we had uh short-term uh portfolios and some excess SLR uh which we have sort of uh unwounded the position and that's the reason why you see the reduction in the uh investment portion.

[01:01:03]>> No. So why was this done? So basically generally whichever banks I have seen their STM portfolio accounts for around about 70% of the investment portfolio.

[01:01:12]So why was it other way around for us?

[01:01:14]Any rational on that?

[01:01:16]>> No no so historically if you have seen uh we have a uh higher trading uh book compared to the HTM book uh compared to the peers. So that gives us the flexibility to uh make decisions based on the price movement. So this has been the case uh historically with uh uh us compared to PS and this time uh given the uh yield movements uh we have decided to uh reduce the trading positions and therefore you are seeing the reduction in the investments.

[01:01:48]>> Okay. And on the LCR just to clarify the disclosure that we make that shows 134% but that is on consult basis. So but however we don't disclose LCR versus standalone right if one has to look historically out as standard.

[01:02:02]>> Yeah. Yeah. So uh roughly as I said LCR at the stand uh alone is at the level which I just uh clarified to you. It is normally between 120 and 125.

[01:02:14]>> And that is the average number.

[01:02:17]>> Yes.

[01:02:18]>> Okay. Thank you.

[01:02:21]>> Thank you. Our next question is from the line of Nitan Agarwal from Motilwal.

[01:02:27]Please go ahead.

[01:02:31]>> Yeah. Hi uh good evening. Uh thanks for the opportunity. I have uh two questions. Uh one is around the margins.

[01:02:37]Uh so if I look back like COTH has always been regarded as a bank with a very high risk adjusted margins. I simply mean like net interest margins minus credit cost by risk adjusted. But over the recent years with the margin compression and the rise in credit cost we somewhere has kind of uh like lost on to this leadership. So how do you internally look at it? How do you benchmark versus the peers? Because even for next fiscal we are talking about some moderation from here and credit cost has been ranging around 60 65 which is also like a tad higher than the peers. So how do you look at this equation? That's first question.

[01:03:10]>> Yeah. So I guess uh I guess you're right. What really happened was that uh in the first instance the whole micro finance industry went through uh a massive downturn that was an industry kind of issue and uh being part of it uh we took some hits there. Uh secondly the unsecured portfolios particularly in personal loan and card uh went through a credit kind of cycle. Now we have been saying for the last couple of quarters that our credit uh is improving and as Dwang highlighted in Q1 our credit costs were 93 basis points uh and we've ended Q4 at 39 basis points. We feel very good about where we are from a credit cost perspective on our unsecured book. Now we are back in the micro finance business and we're back to growing cards, back in the business of growing personal loans and the early delinquencies on these kind of portfolios all look very very uh very much in the acceptable range. So effectively the kind of stress that we saw in the credit uh on the credit cost line uh during the first three quarters of the year is effectively behind us.

[01:04:27]Right. And any interest on IT refund this quarter?

[01:04:31]>> No. No interest.

[01:04:32]>> No refunds on it uh this quarter.

[01:04:37]>> Okay. Sure. And the other question is around the cost ratios. Now we have done a commendable job in terms of controlling the overall OPICS and over the last two years while the revenue lines under pressure. So any any like u uh indication as to how much of improvement you see foresee on the cost to asset line over the coming years? how much room we further see in terms of improving the operating leverage from where we are.

[01:04:59]>> So look uh like I've always said that there are three pillars of my strategy.

[01:05:04]Number one is the focus segment. Number two is the product verticals and number three is [clears throat] the automation and digitization of Kotuk and the automation and digitization of Kotuk is the power of that is demonstrated by uh the cost of total assets. And as you can see during the year that has come off by 27 basis points. We will continue strongly at this effort to continue to automate and digitize uh the company as much as possible to be able to uh to be able to take out a cost. In fact, now with the technology uh embargo behind us, with the credit cost issues uh behind us, uh a lot of my attention and focus is really on going to be getting cost efficiencies uh uh in this coming year.

[01:06:00]>> Sure. Thank you so much, sir. Wish you all the best.

[01:06:03]>> Thank you.

[01:06:05]>> Thank you. Our next question is from the line of Pam Subramanyan with Invest.

[01:06:11]Please go ahead.

[01:06:14]>> Hi, good evening. Thanks for taking my question. Um, most of them have been answered. Just on two lines, the fees and opex uh so this year um both you know the growth has been soft. Um 5% on fees, opex has grown 4%. Um I understand it has something to do with the unsecured piece not growing as well. But how to look at both these lines going into next year? Yeah.

[01:06:39]>> On the fees side, honestly, uh what has affected us uh most significantly has been uh our credit card book, right? Uh our credit card book has been relatively flat and uh therefore we have not seen the kind of kick up in fees. Like Anuk mentioned uh credit card is a business that we are spending a lot of time and we spend a lot of time rejigging the entire product stack so that we have the right product for the right kind of customers. So right from a solid card for the affluent customer to a cashback card for the everyday customer.

[01:07:18]With this product, right product, right customer in place, we are now getting ready to kind of really uh step up acquisition volumes and uh uh spend volumes and uh ENR volumes. Of course, the best Asian crisis and some uh stuff like that is something that we've got very very conscious of and we're not going to do anything that is uh you know going to get us into trouble. But we are we have put the building blocks into place to grow the credit card business.

[01:07:51]Generally speaking, uh the other fees uh are doing uh pretty are doing pretty okay. Uh and we expect to see normal growth and particularly I mean if you focus on what uh Jep mentioned about our ability to now uh really get the products of the subs sold into the customer base of the bank both physically as well as digitally we should see uh progress. That is something that we are working on as we speak. Uh and uh hopefully that'll start showing some results soon.

[01:08:29]>> Ash just a followup if I can. So would it be fair to say both TE's and OPEX grow in line with the balance sheet or uh is there some operating leverage that could play out next year as we saw this year?

[01:08:40]>> Uh let me take this. So see uh obviously if the fees have to increase there will be acquisition cost uh related to the volume right but uh if I look at the uh opex cost which has been achieved uh is largely in the uh payroll and the staff cost line which is a fixed cost reduction uh which is more of a permanent reduction. So I think what will happen essentially is that as we uh grow the fel line uh variable cost associated with the volume may s increase but in line with the growth in income. However uh we will continue to focus on the uh fixed cost reduction uh as well going forward which we have been doing uh for last one year. uh and that obviously will continue to result uh in cost to asset uh going down and improving the ROA. So ROA will improve through uh fee as well as cost redu fixed cost reduction both.

[01:09:43]>> Perfect. Thank you so much. All the best. Thank you.

[01:09:48]>> Thank you. Our next question comes from the line of Prakar Sharma from Jeff.

[01:09:53]Please go ahead.

[01:09:55]Thank you and congratulations on the result. I just wanted to make a quick update. What's the status of this brand?

[01:10:02]Uh >> sorry to interrupt but your line is not very clear.

[01:10:07]>> Is it clear now?

[01:10:09]>> Yes.

[01:10:10]>> Thank you. So I just wanted to check if there is any update on this Panchula branch uh related case and if there is any charge taken uh into the P&L this time and in any case has this been any uh implication on the way the rates uh rates increases have been done. Uh the second question is on this 100 crores uh reversal of uh staff cost you've had.

[01:10:33]Just wanted to check that a couple of other banks have had an increase provision because of the rate change uh and impact on the retirement benefits whereas you have had a right back. Uh could there be any clarification on how this divergence happens uh within the same environment broadly? Thank you.

[01:10:55]>> Okay. Uh no clear. and take the punchula. This is the matter is currently being investigated by law enforcement agency. Therefore, it would not be appropriate to say anything at this stage. Uh the directorate of enforcement is investigating the matter.

[01:11:11]The preliminary uh FIR reveals uh a set of embezzlement in terms of the funds from uh where some it has revealed that there is nexus uh between officials of the corporation, officials of uh bank and private persons and there have been certain arrest which have happened. Uh we are cooperating with the relevant authorities.

[01:11:38]uh that's where the position today stands on punchula in terms of specific provisions uh we we we have overall adequate provisions so there is no specific conversation on specific provision on the matter but as a bank we do carry adequate provisions >> yeah on your question of 100 cr uh liability I think it is uh what the way it works is that we have pension and duty liability both uh which are discounted at the uh rate uh by the actuary and as you know the discount rate actually has gone up uh during the last quarter. So uh others may not have the pension liability relating to the IV staff we have that and therefore we are seeing the reason because of the increase in the discounting rate uh you you are getting a right back basically.

[01:12:29]>> Thank you so much.

[01:12:32]>> Thank you ladies and gentlemen. We will take that as a last question. I would now like to hand the conference over to Mr. Ashokwani for closing comments. Over to you sir.

[01:12:43]>> Uh thank you. Thank you very much for joining us uh on this Saturday evening.

[01:12:47]Uh I look forward to again chatting with you uh for the next quarter results.

[01:12:53]Thank you so much.

[01:12:56]>> Thank you on behalf of Kotak Mahendra Bank. That computes this.