Private lender Kotak Mahindra Bank's net profit rose 32 per cent over a year before on a consolidated basis for the December quarter, at Rs 945 crore as compared to Rs 716.6 crore earlier.
On a stand-alone basis, net profit was up 37 per cent to Rs 634.7 crore, led by higher other income and net interest income. However, the earnings are not strictly comparable to last year’s, as the acquisition of ING Vysya Bank was effective from April 1, 2015.
Net interest income, the difference between interest earned and expended, was Rs 2,370 crore as compared to Rs 1,579 crore in the same period a year before. Other income slipped to Rs 1,805 crore from Rs 1,926 crore, on slower brokerage revenue growth.
The bank saw some pressure on asset quality, with gross non-performing assets (NPAs) rising to 2.01 per cent of the total from 1.58 per cent in the same quarter of 2014-15. In the same period, net NPAs increased to 0.85 per cent, from 0.83 per cent.
With the increase in bad loans, provisioning for these also increased, to Rs 261 crore from Rs 42 crore in the December quarter a year before. The management explained that the provisions also included one made on account of investments and security receipts.
Dipak Gupta, joint managing director, explained there were some challenges on asset quality that the bank had accounted for after acquisition of ING Vysya, and that the pressure was from those accounts. “We haven’t seen any additional pressure; it is mainly from the ING acquisition. Recovery has been slow, as the market has remained stressed. Therefore, sale of assets has been difficult and liquidation hasn’t happened as expected. So, it has taken a little longer than expected for the pressure to ease.” The management says the bank has also begun to see benefits flowing in from the ING acquisition, especially with respect to current and savings accounts.
Kotak Mahindra and associates hold a significant stake in Business Standard Pvt Ltd
It said average savings accounts at the erstwhile Vysya Bank branches grew 31 per cent on a year-on-year basis and at Kotak branches by 41 per cent.
Net interest margin, a key indicator of profitability, was 4.4 per cent. Prior to the acquisition, this was 4.7-4.8 per cent, which then slipped to 4.3-4.4 per cent. The management said they expected to maintain this range for the entire financial year.
At the end of the September quarter, advances rose to Rs 141,136 crore. The management said it saw good growth in the segments of small and medium enterprises, retail and wholesale business. However, growth in the agricultural portfolio was sluggish.
Kotal remained well capitalised, with a consolidated capital adequacy ratio at 16.7 per cent and a tier-1 ratio of 15.8 per cent.
(Kotak Mahindra and associates hold a significant stake in Business Standard Pvt Ltd)