Private sector lender Kotak Mahindra Bank’s consolidated net profit surged 22.4 per cent to Rs 2,947 crore in the quarter ending September 2020 (Q2), from Rs 2,407 crore in the same period last financial year aided by good growth in interest income and lower provisions.
On a standalone level, the bank’s net profit was up 26.7 per cent in Q2FY21 to Rs 2,184 crore, compared to Rs 1,724 crore in the year-ago quarter. Net interest income of the lender was up 16.8 per cent to Rs 3,913 crore in the reporting quarter, compared to Rs 3,350 crore in the year-ago period. Net interest margin for the lender stood at 4.52 per cent, down from 4.61 per cent in Q2FY20.
The bank set aside Rs 368.6 crore for provisions and contingencies in Q2FY21, compared to Rs 962 crore in Q1FY21 and Rs 408 crore in the year-ago quarter. As far as Covid provisions are compared, the lender set aside just Rs 13 crore in the reporting quarter, compared to Rs 616 crore in the previous quarter. So far, as of September 2020, the bank’s Covid-related provisions total up to Rs 1,279 crore which is around 0.62 per cent of its advances. The lender had provided Rs 650 crore of Covid-related provisions in the March 2020 quarter.
"Non specific provisions towards advances (including standard and Covid provisions) is at 177 per cent of the net NPA of the bank," the lender said in a statement.
The bank’s asset quality has improved sequentially as gross non-performing assets (GNPA) stood at 2.55 per cent in Q2FY21, compared to 2.7 per cent in Q1FY21. The net NPA also improved to 0.64 per cent from 0.87 per cent in Q1FY21, and 0.85 per cent a year ago. However, but for the apex court’s interim order asking banks not to classify accounts that were not bad loans till August 31 as NPAs, the bank’s gross NPAs would have been 2.7 per cent and net NPAs would have been 0.74 per cent.
“The bank has, however, made provision for such advances,” it said in an exchange notification.
“The proforma NPAs is not looking as bad as what one would have thought, may be three months back,” said Dipak Gupta, joint Managing Director, Kotak Mahindra Bank.
Slippages for the reporting quarter has come down both, sequentially and year-on-year. The lender reported slippages of Rs 264 crore in Q2FY21, compared to Rs 796 crore in Q1FY21 and Rs 1,091 crore in the year-ago period. The provision coverage ratio or PCR improved to 75.6 per cent, from 68.4 per cent in Q1FY21 and 64 per cent a year-ago.
Commenting on recent reports of the bank looking to take over IndusInd Bank, Jaimin Bhatt, Group Chief Financial Officer (CFO) of Kotak Mahindra Bank said, “We, as a matter of policy, will not comment on any speculation or rumour”.
He added, "Even when we raised capital in Q1FY21, we did talk about the fact that we will look at acquisitions whether it is companies or assets. So, not saying no on any of those growth avenues.”
Advances of the lender de-grew to Rs 2.04 trillion in Q2FY21, compared to Rs 2.13 trillion in Q2FY20. Sequentially, it was up marginally by Rs 847 crore. The bank has maintained it will remain cautious as far as expanding its loan book is concerned.
“As a bank, we have multiple avenues to get earnings growth. What we have chosen in the last six months is, we have been restrained on the credit growth until we see the economy normalising. And hence, we have chosen market linked growth during this period,” said Gupta.
“Even before the pandemic, we had gone conservative on the SME segment and the unsecured retail consumer segment. One would still like to be cautious on both those segments, more so on the unsecured retail segment,” he added.
The bank management is seeing segments in non-urban areas doing well as far as credit growth is concerned. Agriculture, especially agri-commodities, equipments are doing fairly well.
“We have had a slower growth. But as we see green shoots coming in, we would be open to growing our advances book. Having capital is a cushion but we will use it judiciously,” Bhatt said.
Deposits, on the other hand, have remained more or less flat sequentially at Rs 2.61 trillion in Q2FY21 while it has grown 12 per cent year-on-year. The CASA ratio as on September 30, 2020 stood at 57.1 per cent, compared to 53.6 per cent as on September 30, 2019. This is the highest ever CASA ratio reported by the bank, the previous high being 56.7 per cent in June 2020 quarter. CASA is current account - savings account, which is among the cheapest source of funds for any bank.
Capital adequacy ratio of the bank as on September 30, 2020 was 22 per cent, with Tier I ratio at 21.4 per cent.
Shares of the lender closed 2.4 per cent higher on the BSE at Rs 1,415.75 post the results.
Disclosure: Entities controlled by the Kotak family have a significant holding in Business Standard Pvt Ltd