Any specific reason why Kotak Mahindra Bank had a very dull quarter? I mean, is this extra provisioning they have done, is it a one-off or this could be a trend?
Rahul Malani: So, overall, the numbers are weak but on expected lines. Core performance operability has been weak for the sector as a whole. You were talking about the credit cost, I think so that could be considered as a one-off in this quarter due to that core cost is stable, but higher provision is taken on the investment books.
Overall, we believe that for the Kotak Bank relative to the sector the outlook on core operating profitability is better because they have levers to counter the slowdown in the NIMs led by increasing the mix of unsecured plus they have margin in terms of reducing the saving deposit rates, compared to the other banks they were relatively higher paying previously and retail term deposits are also on the higher sides.
They have levers to counter the lower NIMs. In terms of loan growth, the loan growth was modest in this quarter.
The credit card books and the personal loan book will start to grow gradually and that would support the overall retail growth and should be in the range of 15-16% which could be seen one of the highest in the sector.
What about SBI though? While the headline seems like a beat, the core drivers are still seeming to be a bit of a challenge.
Rahul Malani: So, for the SBI, it was a mixed quarter, however, we acknowledge that the core operating profitability would be under pressure for FY26 led by the lower NIMs and slightly lower growth which they have guided. But we believe the growth guidance which they have given is on the conservative side and given the well positioned balance sheet, it will help to capitalise growth given the improving system liquidity, it will be key beneficiary. And apart from that core operating profitability would be under pressure due to NIM, but that will be offset by the higher treasury gains on the book, that will help to sustain ROA at 1%. Lower core operating profitability has been broadly priced in at the valuations level. You see the current valuations are at one time and 0.9 times its core book value estimates FY26 and FY27.
So, we believe that lower profitability has been already priced in. As far as asset quality is concerned, there are no emerging concerns on the asset quality and on the back of which the bank will likely to sustain ROA of around 1% in near to medium term.
