Kotak, IndusInd, Axis Bank Shares Jump on Strong Q2 Business Updates

Kotak, IndusInd, and Axis Bank Shares Surge Following Strong Q2 Business Updates

Investors responded positively to the robust quarterly updates from major Indian banks, reflecting strong growth in advances and deposits.

Strong Performance Across Key Metrics

The shares of Kotak Mahindra Bank rose by 3.59% to close at ₹431.25, while IndusInd Bank’s stock gained 2.79%, ending at ₹906.95. Axis Bank also saw a 2.01% increase, closing at ₹1,248.50. These movements followed the banks’ announcements of robust growth in both advances and deposits for the quarter ending September 30, 2023.

Kotak Mahindra Bank reported a remarkable 25% year-on-year growth in net advances, alongside a 13% quarter-on-quarter increase. Excluding advances linked to Foreign Currency Non-Resident (FCNR(B)) deposits, the loan growth remained strong at around 21% year-on-year. The bank’s deposits also surged by 23% year-on-year, supported by inflows from FCNR(B) deposits, which amounted to $5.78 billion during the quarter.

Axis Bank’s Steady Growth

Axis Bank, the third-largest private sector lender in India, reported a 20.7% year-on-year increase in deposits, reaching ₹14.52 trillion. Its gross advances also saw a healthy rise of 22.7% year-on-year to ₹13.85 trillion. The bank successfully mobilized ₹1.02 trillion in FCNR(B) deposits under the Reserve Bank of India’s swap facility, demonstrating effective liquidity management.

Despite these positive figures, analysts caution about the sustainability of such growth rates. Suresh Ganapathy, MD and Head of Financial Services Research at Macquarie Capital, noted that while loan growth is currently strong, core deposit growth at around 12-13% for both Kotak and Axis Bank is not particularly robust. He emphasized that this could lead to a decline in loan growth rates moving forward.

IndusInd Bank’s Competitive Edge

IndusInd Bank also reported solid growth, with net advances increasing by 11.2% year-on-year to ₹3.62 trillion. However, its deposit growth lagged slightly behind at 10.1%, totaling ₹4.29 trillion. The bank’s CASA (Current Account Savings Account) ratio declined to 28% from 30.7% a year earlier, indicating some pressure on low-cost deposits.

IndusInd Bank mobilized $3.51 billion in FCNR(B) deposits under the RBI’s facility, showcasing its ability to attract foreign currency deposits effectively. This strategic move is likely to enhance its liquidity position, although the declining CASA ratio could pose challenges in maintaining cost-effective funding.

Market Reactions and Future Outlook

The overall market reaction to these updates has been positive, reflecting investor confidence in the banking sector’s fundamentals. However, with RBL Bank’s shares closing 0.72% lower at ₹414, the market remains cautious about the broader implications of rising interest rates and potential economic headwinds.

As the sector navigates these challenges, investors will be closely monitoring the banks’ ability to sustain growth while managing their deposit bases effectively. The upcoming quarters will be crucial in determining whether the current growth momentum can be maintained or if adjustments will be necessary.

Key Highlights

• Kotak Mahindra Bank’s net advances grew 25% YoY, with deposits rising 23% YoY.
• Axis Bank reported a 20.7% YoY increase in deposits and a 22.7% YoY rise in gross advances.
• IndusInd Bank’s net advances increased by 11.2% YoY, while deposits grew by 10.1% YoY.
• FCNR(B) deposits played a significant role in supporting liquidity for these banks.
• Market sentiment remains cautious, particularly regarding RBL Bank’s performance.

Investor Note: The recent performance of Kotak, IndusInd, and Axis Bank underscores the resilience of the banking sector, but investors should remain vigilant regarding potential sustainability challenges in growth rates and deposit mobilization strategies.