Kotak Mahindra Bank’s Profit Jumps Four-Fold; Asset Quality Weakens

Kotak Mahindra Bank’s net profit rose almost four-fold in the April to June quarter to Rs 742 crore, compared to the same quarter last year, according to its regulatory filing on the Bombay Stock Exchange.

The sharp increase in profit can be attributed to a one-time cost of Rs 375 crore incurred in the first quarter of financial year 2015-16, Jaimin Bhatt, group chief financial officer of Kotak Mahindra Bank said in a press conference.

The bank’s net interest income rose 20 percent to Rs 1,919 crore in the first quarter of 2016-17 compared to Rs 1,598 crore in the same period last year. The company expects a 20 percent growth in advances by the end of the financial year, said Deepak Jain, joint managing director of Kotak Mahindra Bank. Jain added that the bank had completed the amalgamation of ING Vysya with itself during the first quarter, and synergies from the merger would show up going forward.

The bank’s cost to income ratio has improved significantly on year and stood at just over 50 percent in the first quarter, a sign that synergies with ING Vysya were kicking in, Jain said. Before the merger, Kotak Mahindra Bank’s cost to income ratio stood at around 53 percent, while that of ING Vysya was at around 56-57 percent, he added.

Kotak Mahindra Bank had acquired ING Vysya in the last quarter of financial year 2014-15.

Asset quality weakened both on a year-on-year and sequential basis. Gross non-performing assets rose 7.8 percent on a sequentially to Rs 3058.5 crore. For the year, gross NPA rose over 26 percent. Net non-performing assets grew to 1.21 percent from 1.06 percent from last quarter. Fresh slippages for the quarter stood at around Rs 200 crore due to stress in the small and medium enterprises segment, Jain said.

During the quarter, the bank has allocated Rs 179.5 crore as provisions for bad loans, down 10.4 percent from Rs 200 crore last quarter.

The company recorded other income of Rs 733.2, 23.8 percent higher on a year to year basis.

The board of directors approved the issuance of debentures or bonds worth Rs 5,000 crore, pending the approval of shareholders, the company reported in a separate press release.

Shares fell 2.17 percent on the Bombay Stock Exchange after the earnings announcement.