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Informist, Saturday, Jul 20, 2024

 

--Kotak Bank Apr-Jun net profit 62.50 bln rupees vs 34.52 bln rupees 

--Analysts saw Kotak Bank Apr-Jun net profit 36.73 bln rupees 

--Kotak Bk Apr-Jun total income 156.75 bln rupee vs 131.83 bln rupees 
--Kotak Bk net NPA ratio 0.35% as on Jun 30 vs 0.34% qtr ago 
--Kotak Bk gross NPA ratio 1.39% as on Jun 30, unch vs qtr ago 
--Kotak Bk Basel III capital adequacy ratio 22.41% as on Jun 30 

--Kotak Bk Apr-Jun net interest income 68.42 bln rupees, up 10% YoY 

--Kotak Bk Apr-Jun net interest margin at 5.02% 

--Kotak Bk provision coverage ratio 75% as on Jun 30 

--Kotak Bk net advances 3.9 trln rupees as on Jun 30, up 19% YoY 

--Kotak Bk current, savings account ratio 43.4% as on Jun 30 

--Kotak Bk Apr-Jun fresh slippages 13.58 bln rupees 

--Kotak Bk Apr-Jun credit cost 0.55% vs 0.42% quarter ago 

--Profit on general insurance arm stake sale 35.2 bln rupees 

--Kotak Bank: Made comprehensive plan to resolve tech infra issues 

--Kotak Bank: Aim to grow unsecured book in mid-teens 

--Kotak Bank: Remain alert to risks in unsecured book 

--Kotak Bank: Seeing some stress in lower ticket segments 

 

By Kshipra Petkar

 

MUMBAI – Kotak Mahindra Bank's net profit for the quarter ended June was 62.50 bln rupees, sharply up by 81% from a year ago and against analysts' estimate of 36.73 bln rupees. The surge in profit was due to a net gain of 35.2 bln rupees from divestment of 70% stake in its general insurance arm to Zurich Insurance Co, the bank said in its notes.

 

Consequent to the stake sale, Kotak General Insurance Co has ceased to be the bank's subsidiary as it now holds 30% stake in the company. However, the bank said it will continue to act as a corporate agent for distribution of general insurance products.

 

The bank's total income rose 18.9% on year to 156.75 bln rupees and net interest income increased 10% to 68.42 bln rupees. The net interest margin was 5.02%. 

 

In terms of asset quality, the gross non-performing asset ratio remained unchanged on quarter at 1.39% as on Jun 30. Net NPA ratio increased to 0.35% from 0.34% a quarter ago. 

 

"There are certain pockets, particularly in cards, which is the lower ticket item and the people who are new to credit, we are seeing some increased stress there, as well as where a certain number of customers have got over leveraged so, those are the customers that are showing some signs of stress. We are working very carefully with our teams and those customers to try and get them back into good financial health. Those are the two areas which we are kind of really working on," Ashok Vaswani, chief executive officer of Kotak Mahindra Bank, said in a call post-earnings.

 

Provisions, other than tax and contingencies, increased by 58.8% on year to 5.8 bln rupees for the quarter. On a sequential basis, the bank's provisions were up more than twofold. Provision coverage ratio was 75% as on Jun 30. Fresh slippages increased to 13.58 bln rupees in Apr-Jun from 13.05 bln rupees a quarter ago and 12.05 bln rupees a year ago.

 

The capital adequacy ratio, as per Basel III, was 22.4% as on Jun 30 and the common equity tier-I ratio was 21.3%. The annualised credit cost for the quarter was 0.55%, higher than 0.46% a year ago and 0.42% a quarter ago.

 

The balance sheet of the bank showed robust growth across all segments, with net advances up 19% on year at 3.9 trln and deposits up nearly 16% on year at 4.47 trln rupees as on Jun 30.

 

Within advances, all the segments--consumer, commercial, corporate and small and medium enterprises--grew at 20-21%. The share of unsecured retail advances, including retail microcredit as a part of net advances, fell to 11.6% as on Jun 30 from 11.8% a quarter ago.

 

"For us the unsecured retail business from appetite perspective, is up to the mid-teens. But we will always be guided by the risk-adjusted returns as we look at the businesses," Shanti Ekambaram, deputy managing director of Kotak Mahindra Bank, said in the conference call.

 

She said the credit card business was impacted due to the embargo and hence the bank focussed on the existing customers to drive up their spending. "We are hoping that when the embargo gets lifted, we will sort of come back with our strategies with the bank," she said.

 

Home loans and loans against property were up 17% on year at 1.11 trln rupees and credit cards portfolio was up 29% on year at 146.44 bln rupees.

 

Within deposits, the current and savings account deposits were at 1.94 trln rupees as on Jun 30, down from 2.04 trln rupees a quarter ago. The CASA ratio was 43.4%, lower than 49.0% a year ago. The cost of funds increased to 5.10% from 4.50% a year ago. 

 

The bank considers pure savings, special deposit scheme, and term deposits as the three pillars to raise deposits. Under the special deposit scheme, Kotak ActivMoney, a customer can earn up to 7% interest rates on fixed deposits of 180-day tenure.

 

RBI ACTION

In April, the Reserve Bank of India barred the bank from onboarding new customers on its online and mobile banking channels and issuing fresh credit cards. Vaswani said that they have made a comprehensive plan to resolve all the issues with their technological infrastructure.

 

The bank has appointed Grant Thornton Bharat as the external auditor, in consultation with the RBI. "As we complete all elements of the plan, once the thing is completed internally, we hand it over to GT Bharat. GT Bharat then audits it and submits it to the RBI," Vaswani said.

 

In terms of the timeline, he said that they are continuously working with RBI and as and when they feel there's enough progress, they will get back to business.

 

On mule accounts, Vaswani said, "We don't want to be a bank that encourages this sort of thing, and we are very vigilant on it. We're seeing it in the current account space than the savings account space." He said the bank has built machine learning models which spot these transactions.

 

On Friday, shares of Kotak Bank closed 0.3% lower at 1,821.60 rupees on the National Stock Exchange.  End

 

Edited by Ashish Shirke

 

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