Annual Report 2018-19 Kotak Mahindra Bank Limited | Thirty Fourth Annual Report 2018-19 Courage of Conviction. Constancy of Change. WorldReginfo - 7d3157c0-5a31-4d80-b990-d19fb69adf32 To view / download this report online and for any other information log on to www.kotak.com Contents 01-24 Introduction An Organisation Powered by Conviction and Driven by Constancy of Change 02 28-88 Financial Highlights 04 Consolidated Financial Statements Business Overview 06 Consolidation at a Glance 28 Board of Directors 08 Independent Auditor’s Report 29 Message from Uday Kotak 10 Financial Statements 36 Taking the Leap 13 Financial Information of Subsidiaries and Charting New Paths 16 Basel III (Pillar 3) Disclosures 87 Staying Stable in a Changing World 19 ESG Practices 21 89-276 Awards and Accolades 22 Bank Reports and Statements 26-27 Directors’ Report 89 Management’s Discussion & Analysis 134 Financial Highlights Report on Corporate Governance 174 Consolidated 26 Independent Auditor’s Report 200 Standalone 27 Financial Statements 206 WorldReginfo - 7d3157c0-5a31-4d80-b990-d19fb69adf32 Courage of Conviction. Consolidated Financial Bank Reports and Financial Highlights Constancy of Change. Statements Statements Introduction Courage En route to the top, mountaineers must overcome avalanches and ever new challenges faced by a tiring body and mind. When of Conviction. circumstances change, mountaineers are posed with the question of ascending further or acclimatising to the altitude. Constancy The worlds of mountaineering and finance share parallels. It is experience and expertise that help both stay alive. of Change. Kotak Mahindra Group (Kotak) has been consistently pursuing newer heights for the past 33 years. It has taken leaps to cross many milestones by calibrating its steps and practising caution when confronted with winds of change. Kotak has adapted to new conditions with agility and flexibility; If what you create does choosing purpose and conviction over consequences; sustainability not outlive you, then you and prudence over aggression; long-term over short-term; integrity have failed. and transparency over growth. - Uday Kotak Over time, Kotak has become an adept enterprise – learning and imbibing the art of survival and growth to become bigger, bolder and better. At Kotak, it isn’t just about the destination, the journey to get there is an important element that is laced and driven with the courage to shore up its conviction. Kotak is a “non-stopper” because of its courage of conviction amidst the constancy of change. For Kotak, the best is always the next. WorldReginfo - 7d3157c0-5a31-4d80-b990-d19fb69adf32 An Organisation Powered by Conviction and Driven by Constancy of Change Kotak Mahindra Group is one of India’s leading financial services conglomerates, providing a wide span of solutions across banking (consumer, commercial, corporate), credit and financing, equity broking, wealth and asset management, insurance (general and life), and investment banking. Catering to the diverse financial needs of individuals and corporates globally, while being focussed on India, Kotak has, over the years, evolved into an organisation, continuously striving to set new benchmarks of excellence. ` 3.9 trillion ` 2.9 trillion >60,000 240,000+ Institution* Market Capitalisation** Group Employees Shareholder base 1,500 2,352 ` 2.7 trillion 17 million+ Bank Branches ATMs Wealth + Priority Bank active customer base relationship value 12.4 million 2 million Debit Card holders Credit Card holders * Consolidated Assets ** as on 31st May, 2019 02 Annual Report 2018-19 WorldReginfo - 7d3157c0-5a31-4d80-b990-d19fb69adf32 Courage of Conviction. Consolidated Financial Bank Reports and Financial Highlights Constancy of Change. Statements Statements Introduction Multiproduct strategy for higher engagement When consumers use multiple products and services from the Bank, their engagement increases exponentially driving up loyalty and brand advocacy. Keeping this in mind, we created simplified journeys for over 12 products where the customer can either opt in for the product/service in 3 simple clicks or make a request for the same immediately. For instance, to drive the consumption of one of our insurance products, we introduced personalised push notifications which had customised details on the offering based on customer demographics. Branches [No./%] North 2 478 / 32% Jammu & Kashmir 10 STATE-WISE BANK BRANCH NETWORK Himachal Pradesh 82 10 West 463 / 31% Punjab 64 Uttarakhand 98 Branches Haryana 1 1,500 East 63 Delhi 76 Sikkim 4 88 / 6% 22 1 Rajasthan Uttar Pradesh Assam Bihar Meghalaya 1 142 9 45 39 21 Tripura Gujarat Jharkhand Madhya Pradesh West Bengal 2 South Chhattisgarh 18 471 / 31% Dadra & 312 Nagar Haveli Odisha Maharashtra 85 Branch Classification [No./%] Telangana Rural IBU in GIFT City 224 /15% 7 107 Dubai Rep Office 161 Goa Semi-urban Andhra Pradesh 291/19% Karnataka Branches 86 1,500 Metro 32 Tamil Nadu 662/44% Kerala No. of ATMs 2,352 Urban 323/ 22% Map not to scale. For illustrative purposes only. 03 WorldReginfo - 7d3157c0-5a31-4d80-b990-d19fb69adf32 Financial Highlights Net Interest Income (` in cr.) Net Profit (` in cr.) Net Worth (` in cr.) 58,280 7,204 FY 19 14,748 50,486 24% 6,201 27% CAGR CAGR 38,491 33,361 FY 18 12,664 4,940 22,153 3,459 FY 17 10,867 3,045 FY 16 9,279 23% FY 15 6,353 CAGR FY 15 FY 16 FY 17 FY 18 FY 19 FY 15 FY 16 FY 17 FY 18 FY 19 Total Assets (` in cr.) Book Value Per Share# (`) Advances (` in cr.) 395,171 302.7 28% 337,720 21% FY 19 243,462 CAGR CAGR 264.9 276,188 FY 18 240,804 209.1 205,997 181.9 FY 17 148,576 143.4 167,125 FY 16 144,793 29% FY 15 CAGR FY 15 FY 16 FY 17 FY 18 FY 19 FY 15 FY 16 FY 17 FY 18 FY 19 88,632 Current Account and Savings Account (CASA) Balances (Bank Standalone) 52.5 50.8 118,586 44% 44.0 CAGR 97,775 38.1 36.4 69,265 Current account and 52,776 savings account (%) 27,217 Current account and savings account (` in cr.) FY 15 FY 16 FY 17 FY 18 FY 19 All nos. on a consolidated basis except where stated Merger of ING Vysya Bank effective April 1, 2015. FY15 numbers not comparable. # Book Value Per Share adjusted for Bonus issuance in July 2015 04 Annual Report 2018-19 WorldReginfo - 7d3157c0-5a31-4d80-b990-d19fb69adf32 Courage of Conviction. Consolidated Financial Bank Reports and Financial Highlights Constancy of Change. Statements Statements Financial Highlights Financial Highlights Net Interest Income (` in cr.) Net Profit (` in cr.) Net Worth (` in cr.) Market Capitalisation (` in cr.) Kotak Securities Average Daily Volume (` in cr.) 58,280 7,204 FY 19 14,748 50,486 FY 19 254,723 6,201 24% 27% 39% 26,203 CAGR CAGR 38,491 CAGR 33,361 FY 18 12,664 4,940 FY 18 199,674 22,153 3,459 3,045 FY 17 10,867 FY 17 160,563 13,691 8,981 7,329 FY 16 9,279 FY 16 124,857 7,107 23% 26% FY 15 6,353 101,429 CAGR CAGR FY 15 FY 16 FY 17 FY 18 FY 19 FY 15 FY 16 FY 17 FY 18 FY 19 FY 15 FY 15 FY 16 FY 17 FY 18 FY 19 Total Assets (` in cr.) Book Value Per Share# (`) Advances (` in cr.) Total Assets Under Management (` in cr.) Bank Capital Adequacy Ratio (CAR) and Tier 1 Capital (%) 395,171 225,274 302.7 28% 337,720 21% FY 19 243,462 29% 18.2 CAGR CAGR 264.9 CAGR 182,519 17.6 276,188 17.5 FY 18 17.2 16.9 16.8 240,804 209.1 205,997 141,336 16.3 16.2 15.9 181.9 15.3 FY 17 102,249 148,576 143.4 167,125 80,653 FY 16 144,793 % % % % % 29% FY 15 FY 16 FY 17 FY 18 FY 19 FY 15 FY 16 FY 17 FY 18 FY 19 FY 15 CAGR FY 15 FY 16 FY 17 FY 18 FY 19 FY 15 FY 16 FY 17 FY 18 FY 19 88,632 Capital Adequacy Tier 1 Capital Current Account and Savings Account (CASA) Balances (Bank Standalone) Group Branch Network (Nos.) FY 15 684 77 211 1,128 79 2,179 Banking 52.5 50.8 Car Finance 118,586 44% FY 16 1,333 79 227 1,209 79 8 2,935 44.0 CAGR Life Insurance 97,775 FY 17 1,369 79 235 1,281 79 12 3,055 * 38.1 Securities 36.4 69,265 Current account and FY 18 1,388 84 227 1,325 83 15 119 3,241 Mutual Fund 52,776 savings account (%) FY 19 1,500 89 243 1,328 84 17 176 3,437 General Insurance 27,217 Current account and BSS Microfinance savings account (` in cr.) FY 15 FY 16 FY 17 FY 18 FY 19 All nos. on a consolidated basis except where stated All nos. on a consolidated basis except where stated Merger of ING Vysya Bank effective April 1, 2015. FY15 numbers not comparable. Merger of ING Vysya Bank effective April 1, 2015. FY15 numbers not comparable. # Book Value Per Share adjusted for Bonus issuance in July 2015 * branches, franchises and referral co-ordinators 04 Annual Report 2018-19 05 WorldReginfo - 7d3157c0-5a31-4d80-b990-d19fb69adf32 Business Overview Consumer Banking • Provides a complete bouquet of deposit and asset products for retail customers, small businesses, NRIs and retail institutions, backed by innovative, digital-first solutions (Kotak Mahindra Bank Limited) Differentiators • With the launch of 811, doubled our customer base to 16 million in 18 months, including 811 digital savings accounts, as per the target set in March 2017 • Digital Payments have grown 4.5 times in FY 2018-19 with continued strong momentum on growth and adoption of Digital Channels, Payments and Products • Strong growth in credit card spends of 56% YoY.