Kotak Mahindra Bank Profit Falls 9% on Higher Loan Provisions

(Bloomberg) -- Kotak Mahindra Bank Ltd. will be cautious about boosting its loan book as the coronavirus pandemic slows India’s economy and erodes profits.

The private-sector lender on Monday reported a 9% drop in April-June profit with provisions for bad loans tripling. It focused on risk-free investments during the period, including purchases of government securities, said Joint Managing Director Dipak Gupta.

“Cautiousness will continue till we see signs of the pandemic peaking,” Gupta said, adding that recoveries of loans will take time. “We should not underestimate the pain. Economy has to come to normal to see signs of these stabilizing.”

The bank, led by billionaire Uday Kotak, was one of the first Indian lenders to raise capital this financial year to fortify its balance sheet, securing nearly $1 billion from the equity markets. The Reserve Bank of India forecasts India’s bad-loan-ratio will soar to a two-decade high of 12.5% by March.

Already saddled with the worst bad debt ratio among major economies, Indian banks face another surge in soured loans due to the pandemic. Banks have been stepping up their loan buffers ahead of the expiry of a regulatory freeze on repayments at the end of August.

Kotak Mahindra Bank’s shares fell 2% in Mumbai.

©2020 Bloomberg L.P.