Kotak Mahindra Bank Q2 Results: Net Profit Falls 7% YoY

Kotak Mahindra Bank Ltd.'s quarterly profit fell from a year ago, owing to higher provisions.

Net profit fell 7% year-on-year to Rs 2,032 crore, the private lender said in an exchange filing. Analysts polled by Bloomberg estimated a net profit of Rs 2,006.7 crore.

The bank's net interest income, or core income, rose 3% from the preceding year to Rs 4,020.56 crore. Its net interest margin stood at 4.45% during the quarter.

According to Jaimin Bhatt, chief financial officer, NII growth is lower as most of the bank's loan growth came toward the end of the quarter.

"We will not get that growth in the NII for the second quarter. We should see the numbers coming in during the October-December period," Bhatt told reporters over a conference call after the results were announced. "We have also seen higher yielding loans 'degrow' year-on-year. This mix change has also affected the NII."

The bank's other income increased 26.44% year-on-year to Rs 1,812 crore.

Asset quality improved sequentially, with gross non-performing asset ratio at 3.19%, compared with 3.56% in the quarter ended June. Net NPA ratio improved by 22 basis points quarter-on-quarter to 1.06%. Gross slippages during the quarter stood at Rs 1,293 crore.

Provisions rose 27% year-on-year to Rs 424 crore. Kotak Mahindra Bank's provision coverage ratio stood at around 67%.

The bank did minimal restructuring even under the second round of Covid restructuring. Exposure to accounts restructured under the second window stood at Rs 268.63 crore.

In the first round of restructuring the bank restructured Rs 226.66 crore. Of the loans restructured in the first round, around 12% or Rs 27.3 crore had turned non-performing, the bank disclosed. Customers who saw their loans restructured under the first scheme also repaid Rs 17.7 crore.

Advances increased 15% to Rs 2.34 lakh crore as on Sept. 30, 2021. The bank said it was seeing improved growth in its small and medium enterprise lending business, as well secured retail loans.

"About a third of the growth in the home loan business this quarter came from balance transfers from other lenders. We are seeing good demand for new home purchases," said Dipak Gupta, joint managing director at the bank.

Kotak Mahindra Bank had announced a festive season interest rate of 6.5% per annum on home loans in the last week of September till Nov. 8.

"If the demand momentum continues and the interest rate scenario does not change, we may consider extending the festive season rates beyond Nov. 8," Gupta said.

The current business environment, according to Gupta, gave a lot of comfort to Kotak Mahindra Bank and it was prepared to get back into unsecured retail loans, while still maintaining a cautious approach.

The bank's current account and savings deposits or CASA deposits made up 60.6% of total deposits compared to 57.1% a year ago. These deposits grew 32% over a year ago.