Kotak Mahindra Bank Q2 profit jumps 27% to Rs 2,184 crore as provisions dip

Kotak Mahindra Bank, the country's third largest private sector lender by market capitalisation, reported profit at Rs 2,184.5 crore in September ended quarter, registering a 26.7 percent growth year-on-year, aided by lower provisions. Rise in pre-provision operating profit, NII and other income also boosted profitability.

Net interest income - the difference between interest earned and interest expended - increased 16.8 percent to Rs 3,913.2 crore in July-September quarter 2020 compared to corresponding period previous fiscal.

Loan book declined 4 percent year-on-year to Rs 2.04 lakh crore and net interest margin contracted to 4.52 percent from 4.61 percent YoY, Kotak Mahindra Bank said, adding deposits at Rs 2.61 lakh crore grew by 12.2 percent YoY.

Provisions and contingencies fell 9.6 percent to Rs 368.59 crore compared to year-ago period, while the sequential fall was 61.7 percent.

Provisions included general provision for COVID-19 deferment cases (Rs 13 crore in Q2FY21 against Rs 616 crore in Q1FY21) and provision towards advances as well as others (Rs 332.72 crore against Rs 352.88 crore QoQ), the bank said in its BSE filing.

COVID-19 related provisions as at September 2020 stood at Rs 1,279 crore (0.62 percent of net advances). Non-specific provisions towards advances (including standard and COVID provisions) is at 177 percent of the net NPA of the bank," it added.

On the asset quality front, gross non-performing assets as a percentage of gross advances fell 15 bps quarter-on-quarter to 2.55 percent in the quarter ended September 2020, and net NPA was down 23 bps QoQ to 0.64 percent, partly due to Supreme Court's interim order which directed on September 3 that accounts which were not declared as NPA till August 31, 2020 shall not be declared as NPA till further orders.

Hence, the bank said it had not classified any account (whether granted moratorium or not) as NPA after August 31.

"If the said Order was not given effect to, the gross NPA would have been 2.70 percent and net NPA 0.74 percent. The Bank has, however, made provision for such advances," it added.

Pre-provision operating profit has seen sharp spike of 31.4 percent to Rs 3,297.49 crore in Q2FY21, compared to corresponding period last fiscal. Non-interest income increased 18.6 percent YoY to Rs 1,452.03 crore in September quarter.

Consolidated profit for the Q2FY21 increased by 22 percent to Rs 2,947 crore, including bank's contribution at Rs 2,184 crore.

Kotak Securities reported a 33.6 percent YoY growth in Q2 profit at Rs 199 crore and Kotak Mahindra Life Insurance 18.8 percent rise at Rs 171 crore, but Kotak Mahindra Prime's profit fell 22.7 percent to Rs 133 crore in September quarter YoY.

LIC increased its stake in Kotak Mahindra Bank to 3.18 percent at the end of September quarter, compared to 2.45 percent in June quarter.

Overall the asset quality concerns weighed on the banking sector. Hence the stock has not seen any major movement during the September quarter and financial year 2020-21, falling 6.8 percent and rising 6.7 percent respectively, though it gained 26 percent from March lows.