Uday Kotak; Image: Mint via Getty Images
Billionaire Uday Kotak, who leads private sector Kotak Mahindra Bank (KMB), on Saturday urged banks, to “build a fortress of resilience “and make financial stability the core of their banking function. Explaining that the financial world was going through a tough period, Kotak said “it is extremely important for banks to be strong. They must protect the interests of shareholders and depositors, both are interconnected. If there is a problem with one, it quickly translates from one to the other.”
At least four US-based banks and Swiss giant Credit Suisse have collapsed in 2023 and in some cases needed to be rescued through bailouts. The collapse of these banks and inflationary pressures continue to raise concerns of a global slowdown and a shallow recession for the US economy later in 2023.
Speaking to media after KMB announced its Q4FY23 and full-year earnings, Kotak said he was confident of the sta2te of the Indian economy, with the country largely expected to grow at between 6 and 6.5 percent for the twelve months to March 2024 and a nominal GDP of 11 and 11.5 percent. “The bank could grow at 1.5-2 times nominal GDP, this could be sustainable growth over a period of time,” Kotak told media at a presser, largely believed to be his last annual earnings conference, as managing director and CEO.
Kotak is set to be appointed as a non-executive, non-independent director of the bank, once his term as MD and CEO ends on December 31 this year. He handled a few questions which came his way on how the bank – which his family had promoted and got a banking licence in 2003 – will function without his leadership, going ahead. Kotak spoke about the principles of banking which he believes will always outlive an individual. “Simplicity (having simple products), prudence (not doing what does not make sense) and humility are all critical to protecting financial stability,” he said.
The bank is yet to announce a successor to Uday Kotak.
KMB’s net profit for FY23 rose 28 percent year-on-year to Rs 10,939 crore from Rs 8,573 crore in FY22. Net interest income (NII) for FY23 also rose 28 percent to Rs 21,552 crore, from Rs 16,818 crore in FY22.
The CASA ratio as at March 31, 2023 stood at 52.8 percent. Asset quality for the bank has also improved, with gross NPAs at 1.78 percent and net NPAs at 0.37 percent, compared to 2.34 percent and 0.64 percent respectively a year earlier.
KMB stands well capitalised, at 21.8 percent and a CET1 ratio of 20.6 percent. Uday Kotak said it is KMB’s capitalisation which will keep the bank well-muscled to stay financially strong and continue to grow, both organically and inorganically.
“The fundamental narrative of banking has moved towards higher capital buffers, going forward. We are well above those buffers. We have dry powder and the capital to be able to look at inorganic stock. We have the potential to grow our balance sheet, both inorganically and organically,” Kotak said. “We continue to stay hungry [for opportunities],” Kotak said.
In February, KMB announced that it will acquire NBFC-micro-finance firm Sonata Finance, through an all-cash consideration of Rs 537 crore. Once the deal is approved, Sonata will become a wholly-owned subsidiary of the bank. As of December 31 last year, Sonata had assets under management of Rs 1,903 crore, servicing a customer base of around 9 lakh through a branch network of 502 branches across 10 states.
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