Kotak Mahindra Bank net profit up 31% at Rs 942 cr

Private sector lender Kotak Mahindra Bank reported a 31 per cent growth in consolidated net profit for the July-September 2015 quarter to Rs 942 crore from Rs 718 crore in the year-ago period. The rise in net profit was on the back of strong growth in advances, which led to higher net interest income.

On standalone basis, net profit rose 28 per cent to Rs 569.5 crore. On consolidated basis, net interest income — the difference between interest earned and interest expended — grew 44 per cent to Rs 2,278 crore. However, other income which includes fees, income from treasury etc grew only five per cent to Rs 1,732.50 crore. The moderate growth in other income was on account of loss on sale of investments at Rs 62.83 crore in the quarter ended September, compared to a profit of Rs 278 crore in the corresponding quarter in FY15.

Asset quality of the bank remained stable on a sequential basis though it worsened on a year-on-year basis due to the acquisition of ING Vysya Bank, which came into effect from April 1, 2015.

The bank’s gross non-performing assets (NPA) increased to 2.08 per cent from 1.59 per cent. Net NPA, too, increased to 0.93 from 0.84 per cent. Dipak Gupta, joint managing director of Kotak Mahindra Bank, explained there were fresh slippages worth Rs 200 crore mainly from infrastructure and construction sector. “We had created a bad bank within the bank after the acquisition of ING Vysya bank. It constituted six per cent of the acquired assets and the slippages are from there.”

The bank said the earnings were not strictly comparable to the corresponding quarter last year because of the acquisition and integration of ING Vysya Bank since April. The management said wholesale banking has already been integrated, but the integration of retail business might take six more months.

“The integration process is progressing as planned and we are seeing positive traction in savings account growth, retail loans and insurance distribution. Various initiatives have been kicked off for cost and income synergies, which will start showing results in due course,” said Uday Kotak, executive vice-chairman and managing director, Kotak Mahindra Bank.

Net interest margin (NIM), a key indicator of the bank’s profitability, stood at 4.4 per cent. This is an improvement on a sequential basis. At the end of the June quarter, NIM was at 4.18 per cent.

According to the management, there will be good growth in small and medium enterprise, retail and agri business.

Deposits also increased to Rs 1,23,211 crore. The lender remained well capitalised with a consolidate capital adequacy ratio at 16.5 per cent and has no immediate capital-raising plan.

Kotak Mahindra and associates are significant shareholders in Business Standard Pvt Ltd