Kotak Bank sets aside Rs 86 cr for derivatives

Kotak Mahindra Bank has made a provision of Rs 86 crore during the fourth quarter ended March 31, 2008, for potential losses from the foreign exchange derivative transactions of its clients .

The Mumbai-based private bank said today that its customers have made a mark-to-market loss of Rs 612 crore as on May 8 this year on account of such transactions. The bank does not have exposure to small and medium enterprise clients.

Derivatives are financial instruments used to hedge risk or for speculation. Their value is based on currencies, stocks, bonds, loans and commodities, or linked to specific events such as changes in foreign-exchange rates. Marked-to-market refers to the bank's writedowns in the value of such investments based on current prices.

Meanwhile, the bank posted a 41 per cent increase in its consolidated net profit for the fourth quarter on the back of a robust growth in interest and fee income. Total income went up by 31 per cent to Rs 1,863 crore.

For the full year, net profit jumped by 84 per cent to Rs 991 crore and income grew by 76 per cent to Rs 7,549 crore.

On a standalone basis, net profit went up by 86 per cent to Rs 69.2 crore in the fourth quarter. Total income rose by 54 per cent to Rs 803 crore and the net interest income improved to Rs 390.7 crore from Rs 195.7 crore a year ago, Kotak Vice-Chairman and Managing Director Uday Kotak said.

Deposits rose by 49 per cent to Rs 16,005 crore.. The share of low cost deposits