While mortgage loans (up 13% y-o-y; 24% of loans) and Agri loans (up 15% y-o-y; 15% of loans) increased, corporate loans (flat y-o-y; 35% of loans) and retail (down 5% y-o-y; 16% of loans) dragged loan book growth.
For Q4FY21, the bank reported PAT of Rs 16.8 bn. NII (up 8% y-o-y) and fee income growth (up 9% y-o-y) were muted. NIMs declined 12bp q-o-q. However, high treasury gains and controlled opex (up only 3% y-o-y) supported operating profit growth of 25% y-o-y. This allowed the bank to absorb higher provisioning costs (c216bp for Q4 vs average of 131bp for the past four quarters) and report PAT growth of 33%. Loan growth (up 2%) remained lower in contrast to deposit growth (up 7% y-o-y).
Stress on balance sheet moderated: Bank reported gross slippages of Rs 54 bn (2.5% of loans) and 108bp for credit cost for FY21. Its gross NPA ratio remained broadly stable at 3.2% (vs 3.3% q-o-q). Net NPAs also remained stable q-o-q at 1.2%. The restructured book (under RBI resolution) was at 19bp of loans and SMA-2 outstanding was at 5bp. Thus, total stressed loans stood at 3.5% of loans (vs 3.9% q-o-q). Against this, the bank is holding 3.1% of total provisions, taking net stressed loans to 0.4% of loans.
Pressure on retail deposit growth continues: In Q4FY21, total deposit growth moderated to 7% y-o-y . The slowdown in deposits was driven by the low traction on term deposits (down 4% y-o-y) even as CASA deposit grew at 15% y-o-y (CASA ratio at 60%). On the asset side, loan book growth remained muted (up 2% y-o-y). While mortgage loans (up 13% y-o-y; 24% of loans) and Agri loans (up 15% y-o-y; 15% of loans) increased, corporate loans (flat y-o-y; 35% of loans) and retail (down 5% y-o-y; 16% of loans) dragged loan book growth.
Retain Reduce: As highlighted earlier, the tenures of both the MD and joint-MD will end in Jan-24. Hence, there will remain an overhang on KMB to appoint a successor. Moreover, despite muted opex growth, the opex to assets ratio (2.3% for FY21) was higher compared with the peer average (1.7%) as the bank has a higher employees to branch ratio (29x vs peer average of 17-20x). Hence, irrespective of the pick-up in loan growth, this should keep the cost ratio sticky and RoE subdued (11-12% over FY22e-23e). Our FY22-23 PAT estimates are largely unchanged (+/-1%). Our unchanged TP of Rs 1,450 implies 22x FY23e standalone EPS and 2.5x FY23e standalone BVPS.
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