Kotak Mahindra Bank standalone net profit increases 32% on higher net income

On a consolidated basis, profit grew to Rs 1,055 cr against Rs 913 cr in Q4FY15

Private sector lender Kotak Mahindra Bank reported 32 per cent growth in standalone net profit for the March quarter to Rs 696 crore, on the back of higher net interest income (NII).

On a consolidated basis, profit grew to Rs 1,055 crore against Rs 913 crore in Q4FY15.

For FY16, net profit grew 12 per cent year-on-year from Rs 1,866 crore to Rs 2,090 crore. NII, the difference between interest earned and expended, in standalone operations rose 65 per cent to Rs 1,857 crore in the quarter ended March against Rs 1,123 crore a year ago. Other income improved to Rs 682 crore, against Rs 668 crore earlier.

However, earnings would not be strictly comparable to the previous year’s figures because of the merger between Kotak Mahindra Bank and ING Vysya Bank came into effect from April 1, 2015.

The bank’s asset quality remained largely stable, as gross non-performing assets (NPAs) for the standalone entity increased only slightly to Rs 2,838 crore, against Rs 2,690 crore in the December 2015 quarter. As a percentage of total advances, gross NPAs increased to 2.36 per cent as compared with 2.30 per cent in Q3FY16. Net NPA also rose to 1.06 per cent, against 0.96 per cent in the previous quarter.

Provisions for bad loans fell marginally to Rs 200 crore in the fourth quarter, against Rs 235 crore a year ago.

The lender might see the asset quality pressure easing in the coming quarters. For FY17, the management has significantly reduced the credit costs forecast to 45-50 basis points, compared with the 82 bps it registered in FY16.

At the consolidated level, the bank reported a 13.6 per cent growth in net profit (after adjusting for minority interest and share in profit of associate & others) from Rs 3,045 crore in FY15 to Rs 3,459 crore.

Uday Kotak, executive vice-chairman & managing director of Kotak Mahindra Bank, said to ensure greater transparency regarding asset quality, the bank has in this quarter reported the list of accounts that fall under SMA-2 (Special Mention Accounts). “This list contains loans above Rs 5 crore on which interest is overdue for more than 60 days but are not NPA yet. And, there are about Rs 153 crore worth of loans that are part of this list, only 0.13 per cent of our total loan book.”

Considering that the SMA-2 is controlled, we believe NPA additions can be checked.” However, he also added that the recovery of loans has become slower.

Net interest margin, a key indicator of bank’s profitability, was 4.35 per cent. The management said the lender would be able to maintain NIMs above four per cent. In the coming quarters, Kotak expects credit growth to improve, especially in the commercial vehicles and small businesses segments.

The lender said the people and process integration with ING Vysya Bank has been completed, while technology integration is in the final lap. It expects the integration process to be completed in Q1FY17.

The bank remained well capitalised with capital adequacy ratio of 16.3 per cent. The bank dismissed any immediate equity fund raising plans.

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