Private lender Kotak Mahindra Bank reported a 16.4 per cent year-on-year (YoY) decline in consolidated pre-tax profit for the quarter ended June 2020 (Q1 FY21) at Rs 2,435 crore, from Rs 2,913 crore in the year-ago quarter due to additional provisioning made for Covid related uncertainties even as net interest income went up 16 per cent.

Net profit at the consolidated level stood at Rs 1,853 crore in Q1FY21 versus Rs 1,932 crore in Q1FY20, down 4 per cent.

The bank made additional Covid-related provisions to the tune of Rs 667 crore in the June quarter, of which Rs 616 crore additional provision was at the standalone level. Along with the provisioning in the March 2020 quarter, the total Covid-related provisioning works out to Rs 1,381 crore for the two quarters.

At a standalone level, the lender reported a 20 per cent decline in pre-tax profit at Rs 1,662 crore while net profit was down 8.5 per cent to Rs 1,244 crore. The bank’s net interest margin (NIM) was down 8 basis points (bps) YoY and 22 bps sequentially to 4.40 per cent.

Asset quality of the lender deteriorated in the reporting quarter with gross non-performing assets (GNPA) at 2.70 per cent, up 45 bps sequentially and 51 bps from June 2019 quarter. Net NPAs of the lender stood at 0.87 per cent, up 16 bps sequentially and 14 bps YoY.

Total provisions and contingencies of the lender, which includes the Covid provisions, rose to Rs 962 crore in Q1 FY21 compared to Rs 317 crore in the year ago quarter. In Q4 FY20, the lender’s loan loss provisions and Covid provisions totaled to Rs 1,047 crore.

The lender reported higher slippages to the tune of Rs 796 crore in Q1 FY21, compared to Rs 751 crore in June 2019 and Rs 491 crore in March 2020 quarter. Provision coverage ratio of the lender stood at 68.4 per cent in Q1 FY21 compared to 69 per cent in March 2020 quarter and 67 per cent in Q1FY21.

The bank further said the economic slowdown and lockdowns have had an impact on certain business areas including new loan origination and collections, and could also result in a rise in credit costs. Capital adequacy ratio of the lender, as on June 30, 2020 stood at 21.2 per cent with tier I ratio at 20.6 per cent. During the quarter, it raised Rs 7,442 crore through a qualified institutional placement of 65 million equity shares.

Disclosure: Entities controlled by the Kotak family have a significant holding in Business Standard Pvt Ltd.