Kotak Mahindra Bank’s net profit increases 16%, asset quality improves

Private lender Kotak Mahindra Bank’s net profit grew 16% year-on-year (Y-o-Y) to Rs 1,854 crore during the December quarter (Q3FY21) on higher interest income and better asset quality. The lender was able to register a growth in the bottom line despite a 35% y-o-y and 62.5% quarter-on-quarter (q-o-q) jump in the provisions and contingencies to Rs 599 crore. Pre-provision operating profit (PPOP) of the lender surged 29.1% y-o-y to Rs 3,083 crore but declined 6.5% sequentially.

Dipak Gupta, joint managing director, Kotak Mahindra Bank said that the lender was witnessing momentum in the selected pockets. “We need to watch a few segments before pressing the accelerator. At this point of time the foot has moved from the brake to accelerator on the secured products,” Gupta said.

The bank’s net interest income (NII) increased 17% y-o-y and 2.4% q-o-q to Rs 4,007 crore.

The asset quality of the bank showed an improvement in Q3FY21. The gross non-performing assets (NPAs) improved 29 basis points (bps) to 2.26%, compared to 2.55% in the previous quarter. Similarly, net NPAs came down 14 bps to 0.5% from 0.64% in the September quarter. The bank has not classified any NPAs since August 31, 2020, due to the interim order of Supreme Court. The apex court had earlier directed lenders not to recognise fresh NPAs, till further orders in the interest-on-interest case.

“Had the bank classified the borrowers more than 90 days overdue on December 31, 2020, as NPA, GNPA would be 3.27% and net NPA would be 1.24%,” said Jaimin Bhatt, president and group chief financial officer, Kotak Mahindra Bank. The bank has, however, made provision for such advances, he added.

Kotak Mahindra Bank’s Covid-19-related provisions as of December 2020 stood at Rs 1,279 crore. The lender said that a very small number of borrowers opted for one-time restructuring. “Following the resolution framework for Covid-19 announced by Reserve Bank of India (RBI) on August 6, 2020, as at December 2020, the bank has approved, for certain eligible borrowers, one-time restructuring of 0.28% of net advances,” the bank said. The Reserve Bank of India (RBI) had earlier allowed one-time restructuring for borrowers impacted by Covid-19

The net interest margins (NIMs) declined 18 bps y-o-y to 4.51% but remained flat sequentially. Advances during the December quarter were down 1.2% y-o-y at Rs 2.14 lakh crore but reported a 4.5% sequential growth. Deposits grew by 10.8% y-o-y and 1.4% q-o-q to Rs 2.65 lakh crore in the December quarter. The current account-savings account (CASA) ratio as on December 31, 2020, stood at 58.9%, compared to 53.7% as on December 31, 2019. The capital adequacy of the lender remained at 21.5% as on December 31, 2020.