Kotak Mahindra Bank's consolidated net profit up 1.4% YoY in Q2

Asset quality has improved sequentially, with the bank reporting GNPAs of 3.19% in Q2FY22 against 3.56% in Q1FY22

Kotak Mahindra Bank reported a 1.43 per cent year-on-year (YoY) increase in consolidated net profit in the July–Sept­ember quarter (Q2) of FY22. Its net profit for the quarter stood at Rs 2,989 crore against Rs 2,947 crore in the year-ago quarter. Sequentially, the profit is up 65.5 per cent.

On a standalone basis, wh­ich reflects the bank’s lending operations, it reported a 7 per cent YoY drop in net profit to Rs 2,032 crore in Q2FY22 due to higher provision as well as operating expenditure. In the year-ago period, the bank had reported a net profit of Rs 2,184.5 crore. However, on a sequential basis, the bank’s net profit is up 24 per cent. Its net interest income (NII) stood at Rs 4,021 crore, up 3.2 per cent YoY from Rs 3,897 crore in Q2FY21 while net interest margin, a measure of profitability, came in at 4.45 per cent, 5 basis points (bps) lower than 4.50 per cent it had reported in Q2FY21. 

“Large part of the hig­her loan growth came toward the end of the quarter. NII income rose slower beca­use of the timing difference. The growth in NII will show up in Q3. On a YoY basis, the higher yielding loans have de-grown. So, the mix change has imp­acted NII,” said Jaimin Bhatt, group president and group chief financial officer, Kotak Mahindra Bank.  

Provisions and contingen­cies of the lender increased 27 per cent to Rs 424 crore in Q2FY22 against Rs 333 crore in the year-ago quarter. 

However, sequentially, the bank reported a 39.7 per cent drop in provision and contingencies. The bank maintained Cov­id-related provisions of Rs 1,279 crore at the end of the Sept­ember quarter and did not utilise any money from this provision pool in the first six months of the financial year. The total provisions held by the bank, which includes specific, standard, and Covid related pro­visions, stand at Rs 7,637 cro­re, or 100 per cent of gross non-performing assets (GNPAs) at the end of September quarter.

Asset quality has improved sequentially, with the bank reporting GNPAs of 3.19 per cent in Q2FY22 against 3.56 per cent in Q1FY22. In the year-ago period, the bank’s proforma GNPAs stood at 2.7 per cent. Net NPAs also declined sequ­entially by 22 bps to 1.06 per cent but remained higher than 0.74 per cent reported in the year-ago period. Last year, the Supreme Court had res­trained banks from classifying loan accounts as NPAs in the backdrop of the pandemic.

The lender has restructured loans worth Rs 495 crore under the Covid restructuring sche­me, with Rs 227 crore being un­der Covid-1 regulatory sch­eme and Rs 268 crore under Covid-2 regulatory scheme. It has also restructured MSME loans of Rs 767 crore as of September qua­rter. As far as credit growth is concerned, the bank’s adva­n­ces grew 8 per cent sequenti­ally and 14.7 per cent YoY to Rs 2.35 trillion. Dipak Gupta, joint MD of Kotak Mahindra Bank, said: “Healthy loan gro­wth does not mean that we ha­ve shed the conservative app­roach. But we are seeing the environment conducive to sup­porting healthy growth. It looks good and comforting at this point in time because the economy is looking good.”

Some challenge areas remain such as the commercial vehicle business. But there are other areas that are looking far better now. The secured loan businesses are looking healthy, and the company has started looking at the unsecured loan segment also, Gupta said.

CASA (current account, savings account) ratio was 60.6 per cent as of September 30, against 57.1 per cent a year-ago and 60.4 per cent as of March 31, 2021. Capital adequacy ratio as per Basel III norms stood at 21.8 per cent. 

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