Kotak Mahindra Bank Ltd.’s profit missed analyst estimates despite robust loan growth and an industry-leading net interest margin while asset quality remained stable.
Net profit of the country’s second largest lender by market capitalisation rose 15.1 percent to Rs 1,124 crore in the quarter ended March as compared to a year ago, Kotak Mahindra Bank said in its exchange filing. That’s lower than the Rs 1,221 crore consensus estimate of analysts tracked by Bloomberg. The bottom line was aided by a a net interest margin of 4.35 percent – the highest in the industry.
Rival HDFC Bank Ltd. reported an NIM of 4.3 percent in the same quarter.
Net interest income, or the core income of the lender, rose 19.3 percent to Rs 2,580 crore, backed by a 25 percent growth in its overall loan book. Kotak Mahindra Bank’s healthy loan book could be credited to its slow-risk consumer loans bias, according to a Bloomberg Intelligence report.
The lender’s corporate lending rose 25 percent to Rs 52,133 crore, while loans for purchase of commercial vehicles increased 40.4 percent to Rs 15,202 crore, on a year-on-year basis. The business banking segment grew at a muted 2.1 percent primarily on account of weakness in the small and medium enterprises segment.
“Historically, the micro, small and medium enterprises have gone through pain due to re-adjustment to the new world, which is the post GST world,” said Uday Kotak, managing director and vice chairman of Kotak Mahindra Bank in a press conference following the earnings announcement.
Asset quality improved marginally during the quarter. Gross bad loan ratio improved to 2.22 percent from 2.31 percent in the last quarter, still one of the lowest in the industry. Net bad loans, as a percentage of total advances, declined to 0.98 percent from 1.09 percent in the same period. Provision for bad loans, however, rose sequentially to Rs 306.9 crore from Rs 212.7 crore.
- CASA ratio as on March 31 stood at 50.8 percent from 44 percent in the previous quarter
- The board announced an interim dividend of 70 paise per share.
- Uday Kotak has been re-designated as managing director and chief executive officer of the bank with effect from May 1.
- Shankar Acharya, part-time chairman, will retire on July 19.
- Non-Executive Independent Director Prakash Apte will replace Acharya as part-time chairman.
The stock extended gains after the announcement of results, rising as much as 2.5 percent as of 2:15 pm. The Uday Kotak-led bank’s share price has risen 18.6 percent so far this year compared to a 3.5 percent rise in the S&P BSE Sensex Index.