Kotak Mahindra Bank's net profit up 21.3% yoy to Rs 17.47 bn in Q2

Gross NPAs, fell to 1.91 per cent for the September quarter, against 2.14 per cent in the year-ago quarter

Private lender Kotak Mahindra Bank reported a 21.3 per cent increase in its September 2018 quarter (Q2) consolidated net profit on account of higher interest and fee income. The asset quality of the bank’s loan book also improved during the quarter.

Profit after tax at the consolidated level rose to Rs 17.47 billion in Q2 FY19, from Rs 14.41 billion in the year-ago period.

Total consolidated income rose 18.5 per cent year-on-year (YoY) to Rs 108.29 billion, said the bank in a filing to stock exchanges.

At the standalone level, which represents the banking operations, the net profit increased by 15 per cent to Rs 11.42 billion, against Rs 9.94 billion in the year-ago quarter.

Consolidated net interest margin or NIMs for September 2018 quarter were lower at 4.1 per cent compared to 4.2 per cent in the June 2018 quarter and 4.3 per cent in the year-ago quarter. “There will be improvement in margins going forward as it takes time to pass on rates under the MCLR (marginal cost based lending rate) regime,” said Dipak Gupta, joint managing director, Kotak Mahindra Bank.

Gross non-performing assets (NPAs), as a percentage of total advances on a consolidated basis, fell to 1.91 per cent for the September quarter, against 2.14 per cent in the year-ago quarter and 1.93 per cent in the previous June quarter.

Net NPAs as a percentage of net advances stood at 0.73 per cent for the September quarter, against 1.08 per cent in the year-ago quarter and 0.77 per cent in the June quarter. The decline in NPA ratios indicate an improvement in the asset quality.

The bank said that it was cautious on business banking as it was showing early signs of delinquency.

The bank’s exposure to non-banking finance companies (NBFC) stood at Rs 130 billion, of which 90 per cent is AA+ rated. The total exposure also includes Rs 12 billion of exposure to its own subsidiaries. “We are comfortable with the size of the NBFC exposure,” Jaimin Bhatt, president and group CFO, Kotak Mahindra Bank.

According to Basel III, the consolidated capital adequacy ratio (CAR) stood at 18.7 per cent as compared to 19.2 per cent in the year-ago period. For standalone operations, the CAR came in at 17.04 per cent in Q2 from 18.36 per cent a year ago.

For the standalone bank, net interest income increased by 16.3 per cent YoY to Rs 26.89 billion, while other income, which includes fee income, was up 26.3 per cent YoY to Rs 12.05 billion in the September quarter.

As a result, the ratio of current and savings accounts (CASA), which are low cost sources of funds, to total deposits grew from 47.8 per cent a year ago to 50.2 per cent as at the end of September 2018 quarter.

Gupta said the bank is still in talks with the Reserve Bank of India regarding the dilution of promoter stake, which is an ongoing process. He added that the bank was open to merger as a route to dilute promoter stake.

Kotak Mahindra Bank also said it had suspended the 811 account, which only required Aadhaar to open the account, for the time being due to the Supreme Court judgment.

Disclosure: Entities controlled by the Kotak family have a majority holding in Business Standard