Kotak Mahindra Bank Reports 27% Increase In Q2 Net Profit
Private sector lender Kotak Mahindra Bank Ltd. reported a 27% increase in net profit in the second quarter of the current financial year, on lower provisions and higher core income.
For the July-September period, the bank reported a net profit of Rs 2,184 crore as against a net profit of Rs 1,724 crore a year ago. In the April-June quarter the bank had reported a net profit of Rs 1,244 crore.
Net interest income, or core income, rose 16.8% year-on-year to Rs 3,913 crore.
Asset Quality Stable
The bank’s gross non-performing asset ratio fell to 2.55% as on September 30, as compared with 2.7% in the preceding quarter. It’s net NPA ratio fell to 0.64%, down 23 basis points as compared with June 30. The improvement on asset quality was largely because of a Supreme Court interim order, which stopped banks from marking loans down to NPA category after Aug. 31.
Including those assets, the bank’s pro-forma gross NPA ratio was at 2.7% and net NPA ratio at 0.74%.
Provisions for the quarter stood at Rs 368.6 crore, as compared with Rs 408 crore a year ago and Rs 962 crore in the June quarter.
Covid related provisions as at September 30, 2020 stood at Rs 1,279 crore (0.62% of net advances). Non-specific provisions towards advances (including standard and Covid provisions) is at 177% of the net NPA of the Bank.Kotak Mahindra Bank Press Release
According to Dipak Gupta, joint managing director at Kotak Mahindra Bank said the emerging asset quality situation is better than what the bank expected last quarter.
“If you look at recoveries, things are definitely improving in the secured portfolio, the unsecured segment still has a way to go,” Gupta told reporters over a conference call after reporting the bank’s second quarter results.
Advances & Deposits
The bank saw its loan and deposit books remain flat in the July-September quarter as it continued to take a cautious approach towards new lending amid a weak economy.
The bank’s total advances stood at Rs 2.17 lakh crore as on September 30, marginally higher than Rs 2.16 lakh crore as on June 30. Total deposits were at Rs 2.61 lakh crore, unchanged on a quarter-on-quarter basis.
In the deposit portfolio, current account deposits rose to Rs 40,454 crore as on Sept. 30, from Rs 38,594 crore as on June 30. The bank saw its wholesale deposit base fall to Rs 7,803 crore in the second quarter, from Rs 9,409 crore, on a quarter-on-quarter basis.
According to the bank's disclosures, credit substitutes rose to Rs 13,945 crore, up 39% year-on-year. The bank continues to focus on high quality instruments issued by well rated companies to grow its credit substitutes book, Gupta said.
As far as lending is concerned, at this point we just want to wait and watch. The risk-return position does not justify us pushing the accelerator. In certain segments such as secured retail lending, we have found reason to move our foot off the brake pedal.Dipak Gupta, Joint MD, Kotak Mahindra Bank
In its analyst presentation, the bank said that it is opening up select segments for lending, such as home loans and advances to well-rated companies. Rural and semi-urban lending markets are showing promise, it said.
Other categories showed little or no growth. Unsecured loans fell 11% quarter on quarter to Rs 8,177 crore. Corporate loans fell 3.5% over the preceding three months to Rs 56,119 crore.
“One would continue to remain more cautious in the retail unsecured lending segment. The SME book is buffered by government schemes, which provides us comfort,” Gupta said.
Kotak Mahindra Bank had disbursed loans worth Rs 7,600 crore under the government’s emergency credit line guarantee scheme as on Sept. 30, which further rose to Rs 8,100 crore in October.