Kotak Mahindra Bank 2020 Annual Report Takeaways!

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  • 2.03cr customers.
  • 23 lakh credit cards & 1.5 cr debit cards in circulation.
  • 71,000+ group employees & 1600 branches.
  • Equal presence in West, North & South but lacking in East.
  • Consistent Compounder: while keeping the underwriting standards (going cautious when it’s meant to be) 
    • Consolidated Assets: Rs 4.4 lakh crs. 
    • Casa ratio rose from 38% to 56% from FY16 to FY20.  
    • CA, SA and term deposits (TD) below Rs 5 crore constituted as much as 86% of the total deposits.
    • Grew its market share in consumer finance by 124% on a YoY basis, and saw 26% YoY growth in credit card spends. 
  • Advances breakup: low growth was primarily due to the conservative approach of the Group, lockdown impact due to COVID-19 towards the end of the year and subdued economic activity. Asset Quality: stable.
  • Microfinance where subsidiary, BSS acts as a correspondent:
    • Reaching out to bottom-of-the-pyramid households with a customer base of 6.54 lakh, up by 52% in FY20.
  • Subsidiaries (non-credit risk areas of business): Focus going forward is scaling up these as the economic situation for loans remains weak.
    • Wealth Management & Mutual Funds: 
      • Manages wealth for 50 per cent of India’s top 100 families.
      • Market share in QAAUM (Quarterly average assets under management) has grown to 6.89% in Q4FY20 from 6.13% in Q4FY19
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  • Asset Recovery:
    • Provides vital financing required for getting stressed companies back to mainstream banking.
  • Broking: Though overall market share decreased from 2.6% to 1.7% this year but cash business market share remained the share (highly profitable with an increasing pie: Questionable that margins will remain the same with Zerodha becoming the market leader.
  • Life Insurance:
    • Balanced product mix (Traditional and ULIPs) and balanced distribution mix (Bancassurance, Agency, Direct and Digital Channel, and Group or Institutional Businesses).
    • One of the best margins in the Industry: Cost as of % of premium went from 16.7% in FY18 to 14.2% in FY20.
  • General Insurance:
    • Issued more than double the number of policies totaling to 18.1 lakh in FY 2020 from 7.2 lakh in FY 2019 amounting to a gross direct premium excluding reinsurance of Rs 433.4 crs.
    • Portfolio with 57% motor and 43% non-motor insurance products.
    •  44% growth in business and 151% growth in number of policies sold for FY 2019-20 (low base)
    • Loss ratio of 69%: losses an insurer incurs due to paid claims as a percentage of premiums earned.  (among the lowest in the Industry)
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  • Investment Banking:
    • Weak Capital markets could be an inhibitor.
  • How Kotak Mahindra Bank is looking at underwriting in the current scenario. 
    • Developed a view on the sectors we are comfortable with. 
    • Looked at levels of fixed operating costs of individual companies (the higher the level, the more cautious). 
    • Mindful about how we deal with businesses or companies with high leverage.
  • Consolidated net worth: Rs 76000 crs (BV: Rs 342)
  • QIP issue of Rs 7,400 crs in May 2020 increased CAR to 20%+
  • Net Interest Margin (NIM) increased from 4.31% to 4.62% this year.
  • Promoter Shareholding: 26% | 333,440 individual shareholders.
  • Managerial personnel & top management took a pay cut to tide through this crisis:
    • SAR: Stock Appreciation Rights.

Our article on Everything you need to know about Kotak Mahindra Bank – From how it came into being to how it averted every crisis in the past 10 years!

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JST Investments is a Mumbai-based investment firm that believes in long-term wealth creation. It's a brainchild of Aditya Kondawar, Aditya Shah, and Anish Moonka.
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