Kotak Mahindra Bank Q4 Results: Net Profit Jumps 33% To Rs 1,682 Crore
Customers standing in queue outside Kotak Mahindra Bank. (Photo: BloombergQuint) 

Kotak Mahindra Bank Q4 Results: Net Profit Jumps 33% To Rs 1,682 Crore

Private lender Kotak Mahindra Bank Ltd.'s profit rose in the quarter ended March, aided by an increase in fee income.

Net profit for the quarter jumped 33% over a year earlier to Rs 1,682 crore, according to its exchange filings. Analysts polled by Bloomberg estimated a net profit of Rs 1,908 crore.

Net interest income, or core income, rose 8% year-on-year to Rs 3,843 crore against the forecast of Rs 3,739 crore. Other income rose 31% to Rs 1,949 crore.

In the fourth quarter, the bank set aside Rs 110 crore from interest earned to refund borrowers benefiting from a Supreme Court decision in March. The apex court had asked all lenders to return the compound interest for the moratorium period to all of borrowers, not just those with dues up to Rs 2 crore.

While speaking the media after the earnings, managing director Uday Kotak said that he would remain the bank’s chief at least until 2023. His comments come after the Reserve Bank of India restricted the tenure of promoter chief executives of private banks to 12 years. While the rules kick-in starting this October, CEOs will be allowed to finish existing tenures. Kotak’s current term ends in December 2023.

Also read: RBI’s New Bank CEO Rules: How Long Does Uday Kotak Get To Stay?

Asset Quality

  • Gross non-performing asset ratio of the bank fell to 3.25% as of March from 3.27% in the preceding quarter.

  • The net NPA ratio improved marginally to 1.21% from 1.24% in December.

The December-quarter asset quality figures include the accounts which were not classified as NPAs because a Supreme Court order barring lenders from downgrading accounts at the time.

Loans worth Rs 121.5 crore were restructured under the Reserve Bank of India’s one-time window. This included Rs 82.38 crore worth of retail loans, Rs 12.67-crore corporate loans and Rs 26.45-crore other accounts. Kotak Mahindra Bank held provisions worth Rs 12.92 crore against these accounts.

As of March, the bank held Rs 1,279 crore worth of floating provisions against accounts impacted by Covid-19. The bank said it did not dip into its Covid provisions during the fourth quarter. Total provisions, which include standard asset provisions, specific loan loss provisions and Covid-19 provisions, stood at Rs 7,021 crore.

Credit cost for Kotak Mahindra Bank rose to 84 basis points in the financial year 2020-21 compared with 67 basis points a year ago.

Kotak said the bank is not interested in pushing up short-term collection efficiency over lives.

We think it is not prudent to send our collections executives outside to meet customers, said Kotak. “We want to protect the risk on people balance sheet, rather than the short term risks on our financial balance sheet.”

Commenting on requests for an extension of the one-time restructuring scheme, Kotak said that “patch work will not help” and financial institutions must face the reality. “The right approach is to face the reality and take the impact on the chin.” The bank will allow restructuring on merit and not only because the regulator has permitted it, he added.

Advances & Deposits

The bank’s total advances rose to Rs 2.39 lakh crore from Rs 2.29 lakh crore a year earlier. That was largely aided by a 13% year-on-year increase in home loans to Rs 54,749 crore as of March. The bank brought down the shared of unsecured retail advances to 5.8% of the loan book as of March from 7.5% a year ago.

According to Kotak, the bank will look at unsecured credit growth, but only if it meets risk standards. Currently, the bank is focussed on providing home loans to its customers. “The central importance of a home has gained in these Covid times. We are very interested in financing this need of our customers,” Kotak said.

Total deposits rose 6.5% year-on-year to Rs 2.8 lakh crore. Low-cost current and savings account deposits contributed 60.4% as of March, up from 56.2% a year ago.

The bank wants to grow, but will grow only on our terms, said Kotak. “Our assessment is that this spike in the Covid pandemic will stabilise in a few months. As and when the situation stabilises we will step on the gas and grow.” Kotak said there is a “huge collections challenge” which is set to hit the financial sector as a whole and it is important to “stay light” at this moment.

As far as inorganic growth is concerned, Kotak Mahindra Bank is keeping its powder dry and will be reviewing any opportunities available in the financial sector, the CEO said.

Kotak On Covid & The Economy

Speaking about the second wave of Covid infections, Kotak said that “we may have called victory” too soon. “We have to be good managers and recognise the risks the pandemic will bring to the economy,” he said.

“While things will stabilise in the next few months, we should not think that there will never be a Covid 3.0,” he said.

According to Kotak, the central bank must be open to expanding its balance sheet, adding that “we cannot afford to be ‘first principle economists’ at this time”. “This becomes inevitable to ensure that the state is able to support the needs of the economy and its people.”

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