Kotak Mahindra Bank Meets Expectations In March Quarter, Asset Quality Weakens Marginally
Net profit in the January-March quarter went up 40 percent to Rs 976.5 crore (YoY).
Kotak Mahindra Bank Ltd. reported a growth in standalone profit even as the lender saw a slight increase in stressed assets.
The lender's net profit in the January-March quarter went up 40 percent to Rs 976.5 crore compared to the same period last year, according to a stock exchange filing. The consensus of analyst estimates tracked by Bloomberg had pegged the bottomline at Rs 973 crore.
Net income from interest (NII) rose 16.4 percent to Rs 2,161.4 crore. This was lower than the estimated Rs 2,238 crore. The net interest margin (NIM) widened 11 basis points to 4.6 percent quarter-on-quarter.
Asset quality weakened marginally as gross non-performing assets increased 17 basis points from the last quarter to 2.59 percent of total assets. In absolute terms, the bank had bad loans worth Rs 3,578.6 crore, 12.6 percent higher on a sequential basis.
The bank set aside Rs 267.4 crore for bad loan provisioning, 39 percent higher than what had been provided for in the previous quarter.
Asset Quality Set To Improve
The bank has completed accounting and providing for most of the stressed assets it inherited after its merger with ING Vysya Bank, said Executive Vice Chairman Uday Kotak at a press conference.
The bank had estimated that the stress on ING Vysya’s book was around 2.5 percent of the loan book of the merged entity.
“Nearly 80 percent of the bank’s GNPA of 2.59 percent is from the ING Vysya book,” said Kotak.
In the financial year 2016-17, Kotak Mahindra Bank had a credit cost of 61 basis points, of which around 6 basis points was for standard asset provisioning. In the previous year, the bank had a credit cost of 82 basis points. The higher cost, according to Kotak, was the price of expanding the bank inorganically.
He anticipates that the broad trend of reducing credit costs will continue in the current financial year.
Loan Growth Seen Improving
Pointing to signs of uptick in demand for credit, Kotak said credit growth in the current financial year is likely to be along the lines of that seen in the last quarter of 2016-17.
Advances as on March 31 were just under 15 percent higher than the corresponding period a year ago at Rs 1.36 lakh crore. Loan growth during the quarter was largely led by an uptick in agricultural, commercial vehicle and construction equipment, and housing loans, the bank’s Chief Financial Officer Jaimin Bhatt said.
According to Kotak, a negative consequence of the merger with ING Vysya Nank was the slowdown in lending to the small and medium enterprises sector, also known as business banking.
In the fourth quarter, the bank’s business banking book saw an uptick of 7.3 percent on a sequential basis, indicative of an improvement in the performance of this segment, said Kotak. For the full year, the segment degrew marginally.
Other Key Highlights
- Advances growth rose to 14.9 percent (YoY) from 12.1 percent (YoY) growth in the third quarter; deposits grew 13.5 percent (YoY) in the fourth quarter
- No assets were sold to asset reconstruction companies in the fourth quarter, neither did any account go into corporate debt restructuring or 5/25 scheme.
- Restructured loans considered standard at the end of the quarter were lower at Rs 102 crore (0.07 percent of net advances) as compared to Rs 146 crore ( 0.11 percent of net advances) in the third quarter.
- CASA share of deposits continue to see a steady rise; stood at 44.0 percent at the end of Q4.
- The board recommended a dividend of Rs 0.60 per share.
