Kotak Mahindra Bank net profit falls 8.5% in Q1

The bank’s provision coverage ratio (PCR) fell to 68.4% from 69% at the end of March.

Private sector lender Kotak Mahindra Bank (KMB) on Monday reported a net profit of Rs 1,244.45 crore in the June quarter of FY21, down 8.5% year-on-year (y-o-y), owing to a 204% jump in provisions on a year-on-year basis to Rs 962 crore.

The bank has made a fresh Covid-19 related general provision of Rs 616 crore in Q1FY21. Covid-related provisions as on June 30, 2020 stood at Rs 1,266 crore, or 0.62% of net advances. “Total provisioning towards advances (including specific, standard and Covid provisions) is higher than the gross NPA (non performing assets) of the bank,” the lender said in a release.

As on June 30, 9.65% of the bank’s loan book by value was under moratorium, down from 26% earlier. The management said that 80% of the book under moratorium was secured and the reduction had come about as a result of some commercial and wholesale customers ceasing to avail of the moratorium in its second leg.

Dipak Gupta, joint managing director, KMB, said that there was genuine stress in the system, as was clear from bounce rates, and people would take time to come back to normal. “Some amount of alleviation of the pain has happened, but I think the economy has to first start coming back to normal. The point about repayment bounce is right because people are having difficulties and they will take time to pay back,” Gupta said, adding that this does not necessarily mean those are bad accounts.  “It is just that what you expected to be normal recovery in the past will take a slightly longer time. How long that time will be depends on how quickly all of these things will normalise,” he said.

The bank’s provision coverage ratio (PCR) fell to 68.4% from 69% at the end of March. Its net interest income — the difference between interest earned and interest expended — rose 17.8% y-o-y to Rs 3,724 crore and its net interest margin (NIM), a key measure of profitability, fell 32 basis points (bps) sequentially to 4.4%.

The bank recognised slippages of Rs 796 crore during Q1FY21, compared to Rs 491 crore in Q4FY20 and Rs 751 crore in Q1FY20. The increase in fresh bad loans was primarily on account of a lumpy corporate account, the bank said. KMB saw a deterioration on the asset quality front in Q1, with the GNPA ratio rising 45 bps sequentially to 2.7%. In absolute terms, the gross NPA stood at Rs 5,619 crore at the end of June 2020. The net NPA ratio rose 16 bps to 0.87%.

Customer assets, which includes advances and credit substitutes, stood at Rs 2.17 lakh crore as on June 30, down marginally y-o-y. Advances as on June 30 were at Rs 2.04 lakh crore, down 2% y-o-y. The total deposits grew by 12.3% y-o-y to Rs 2.61 lakh crore. Savings account (SA) deposits grew 34.5% y-o-y and current account (CA) deposits grew 5.6% y-o-y. The CASA ratio as on June 30, 2020 stood at 56.7%, up from 50.7% as on June 30, 2019.

The capital adequacy ratio of KMB as per Basel III, stood at 21.2% and the tier-I ratio was at 20.6% at the end of June after the bank raised Rs 7,442 crore through a qualified institutional placement (QIP) during the quarter. KMB’s shares on the BSE ended 2.03% lower than their previous close at Rs 1,322.45 on Monday.