Kotak Bank Q2 net jumps 27%-Rs 2,581 cr on all-round performance

MUMBAI: Kotak Mahindra Bank on Saturday reported a healthy set of numbers, with net profit growing 27 per cent to Rs 2,581 crore for the three months to September, boosted by record margins and loan sales.

On a consolidated basis, the country's fourth largest private sector lender, which is also into brokerage, life and general insurance and mutual funds, among others, reported a 21 per cent rise in net profit at Rs 3,608 crore in the reporting quarter.

The management led by Deputy Managing Director Dipak Gupta and Chief Financial Officer Jaimin Bhatt attributed the healthy set of numbers -- almost all of them growing at over 20 per cent -- to ''all cylinders, led by consumer verticals, firing well''.

Total income grew to Rs 10,047 crore from Rs 8,408 crore in the year-ago quarter, driven by net interest income that increased to Rs 5,099 crore from Rs 4,021 crore, clipping at 27 per cent. The key profitability metric, net interest margin -- which is the difference between what a bank earns on interest from borrowers and what it pays to depositors -- was at 5.17 per cent for the quarter.

Gupta and Bhatt admitted that NIM cannot sustain at 5.17 per cent as cost of funds increases, and it will fall to 4.25 - 4.35 per cent levels. They attributed the spike in the margins to the automatic repricing of loans with market-linked rates and fees and services rising 24 per cent to Rs 1,760 crore annualised.

This also means that the bank has passed on the entire 190 bps hike in the repo rate since May this year by the RBI, which took the key policy rate to the pre-pandemic levels as it fights to contain inflation which has been over 6 per cent levels for the past three quarters.

On the assets front, gross non-performing assets improved to 2.08 per cent of gross advances, down from 3.19 per cent a year ago. Net NPAs performed better, dropping to 0.55 per cent from 1.06 per cent, Bhatt said.

The bank's fresh slippages jumped to Rs 983 crore sequentially but Bhatt said the same was due to regulatory changes effected in Q1. The net slippage was Rs 657 crore, half of last year when its stood at Rs 1,300 crore. Gupta said the bank took only a nominal hit from the treasury side with the mark-to-market (MTM) loss plunging to just Rs 63 crore from Rs 867 crore last year. Assets, which include advances and credit substitutes from large corporates, grew 25 per cent to Rs 3,21,324 crore.

Non-corporate advances rose 25 per cent Rs 2,94,023 crore. The bank's low-cost CASA (current account savings account) ratio stood at 56.2, which is the second best in the industry after HDFC Bank. Average current deposits grew 7 per cent to Rs 53,971 crore, average fixed rate savings deposits inched up 2 per cent to Rs 1,13,408 crore and average term deposits rose 20 per cent to Rs 1,39,871 crore.

Pandemic-related provisions stood at Rs 438 crore and the bank has standard restructured fund-based outstanding of Rs 354 crore (0.12 per cent of advances) under this. Under the MSME resolution framework, the bank has standard restructured fund-based outstanding of Rs 640 crore (0.22 per cent of advances).

All this had its provision coverage ratio at 73.7 per cent and the capital adequacy ratio at 22.6 per cent. Speaking on the consolidated numbers, Gupta said the life arm chipped in with Rs 270 crore (up from Rs 155 crore) but securities fared bad with a drop in net profit to Rs 224 crore from Rs 243 crore.

Kotak Prime also fared poorly with net profit falling to Rs 222 crore from Rs 240 crore, asset management and trustee arm contributing Rs 106 crore, up from Rs 97 crore; and Kotak Investments net falling to Rs 78 crore from Rs 89 crore. Its microfinance arm was the best performer with Rs 70 crore compared to Rs 8 crore a year ago. Kotak Capital Company saw net profit more than halving to Rs 22 crore from Rs 58 crore.

Kotak Mahindra Bank on Saturday reported a healthy set of numbers, with net profit growing 27 per cent to Rs 2,581 crore for the three months to September, boosted by record margins and loan sales. On a consolidated basis, the country's fourth largest private sector lender, which is also into brokerage, life and general insurance and mutual funds, among others, reported a 21 per cent rise in net profit at Rs 3,608 crore in the reporting quarter.

The management led by Deputy Managing Director Dipak Gupta and Chief Financial Officer Jaimin Bhatt attributed the healthy set of numbers -- almost all of them growing at over 20 per cent -- to ''all cylinders, led by consumer verticals, firing well''.

Total income grew to Rs 10,047 crore from Rs 8,408 crore in the year-ago quarter, driven by net interest income that increased to Rs 5,099 crore from Rs 4,021 crore, clipping at 27 per cent. The key profitability metric, net interest margin -- which is the difference between what a bank earns on interest from borrowers and what it pays to depositors -- was at 5.17 per cent for the quarter.

Gupta and Bhatt admitted that NIM cannot sustain at 5.17 per cent as cost of funds increases, and it will fall to 4.25 - 4.35 per cent levels. They attributed the spike in the margins to the automatic repricing of loans with market-linked rates and fees and services rising 24 per cent to Rs 1,760 crore annualised.

This also means that the bank has passed on the entire 190 bps hike in the repo rate since May this year by the RBI, which took the key policy rate to the pre-pandemic levels as it fights to contain inflation which has been over 6 per cent levels for the past three quarters.

On the assets front, gross non-performing assets improved to 2.08 per cent of gross advances, down from 3.19 per cent a year ago. Net NPAs performed better, dropping to 0.55 per cent from 1.06 per cent, Bhatt said.

The bank's fresh slippages jumped to Rs 983 crore sequentially but Bhatt said the same was due to regulatory changes effected in Q1. The net slippage was Rs 657 crore, half of last year when its stood at Rs 1,300 crore. Gupta said the bank took only a nominal hit from the treasury side with the mark-to-market (MTM) loss plunging to just Rs 63 crore from Rs 867 crore last year. Assets, which include advances and credit substitutes from large corporates, grew 25 per cent to Rs 3,21,324 crore.

Non-corporate advances rose 25 per cent Rs 2,94,023 crore. The bank's low-cost CASA (current account savings account) ratio stood at 56.2, which is the second best in the industry after HDFC Bank. Average current deposits grew 7 per cent to Rs 53,971 crore, average fixed rate savings deposits inched up 2 per cent to Rs 1,13,408 crore and average term deposits rose 20 per cent to Rs 1,39,871 crore.

Pandemic-related provisions stood at Rs 438 crore and the bank has standard restructured fund-based outstanding of Rs 354 crore (0.12 per cent of advances) under this. Under the MSME resolution framework, the bank has standard restructured fund-based outstanding of Rs 640 crore (0.22 per cent of advances).

All this had its provision coverage ratio at 73.7 per cent and the capital adequacy ratio at 22.6 per cent. Speaking on the consolidated numbers, Gupta said the life arm chipped in with Rs 270 crore (up from Rs 155 crore) but securities fared bad with a drop in net profit to Rs 224 crore from Rs 243 crore.

Kotak Prime also fared poorly with net profit falling to Rs 222 crore from Rs 240 crore, asset management and trustee arm contributing Rs 106 crore, up from Rs 97 crore; and Kotak Investments net falling to Rs 78 crore from Rs 89 crore. Its microfinance arm was the best performer with Rs 70 crore compared to Rs 8 crore a year ago. Kotak Capital Company saw net profit more than halving to Rs 22 crore from Rs 58 crore.