Mumbai: Kotak Mahindra Bank Ltd’s consolidated net profit in the March quarter increased 28% to Rs.666 crore from a year ago, mainly due to higher interest income and reduced operating expenses, while other Indian banks reported mixed earnings amid slowing economic growth.
Earnings per share improved to Rs.8.9 from Rs.7. The bank earned Rs.2,226 crore as interest income, up from Rs.1,808 crore, mainly due to demand for loans from individuals and small businesses although corporate lending shrank.
“Small and medium enterprises has been a very good segment for us and even the asset quality is healthy. Consumer loans, which include loans below Rs.5 crore have grown 27%, faster than the 25% overall growth in loan book last year. Corporate demand for loans is down to 12-13% from more than 20% last year as no new projects are coming up and working capital loan demand is slow,” said executive vice chairman and managing director, Uday Kotak.
The corporate loan book fell to Rs.14,535 crore in March from Rs.18,291 crore a year ago.
The bank had to set aside Rs.44 crore, up from Rs.2 crore last year, as net non-performing loans increased to Rs.361 crore from Rs.273 crore.
Net interest margin, or the different between the interest on loans and that paid on deposits, improved marginally to 4.7% from 4.6% last year. Kotak said he expects to maintain margins at 4.5% or higher in 2013-14, while loan growth will continue to be above 20%.
A drop in expenses also contributed to the bank’s profit. Operating expenses dropped to Rs.1,773 crore from Rs.2,311 crore because of a reduction in policyholders’ reserves, surrender expense and a fall in claims to Rs.744 crore from Rs.1,416 crore.
Kotak Mahindra shares gained 1.6% to Rs.716.9 on the BSE, while the benchmark Sensex gained 1.19% to 19735.77 points and Bankex rose 1.17% to 14,531.74 points.
Kotak Mahindra has done well to expand its retail book, said Rajiv Mehta, research analyst at India Infoline Ltd, but as consumption slows there could be some cracks in the asset quality. “Retail has been a low-risk, high-returns business for banks in the last three years, but given the consumption demand in the economy has slowed, we could see some cracks in these loans for all banks,” Mehta said.
Oriental Bank of Commerce
Meanwhile, Delhi-based Oriental Bank of Commerce’s net profit rose 16% to Rs.307.94 crore in the last quarter of fiscal year 2012-13, as against Rs.264.9 crore in the corresponding year-ago period, on the back of a good growth in interest and non-interest income.
Net interest income or the interest earned less the interest paid grew 13.6% to Rs.1214 crore. Non-interest income was up 34.3% to Rs.462 crore, the bank said in a statement. Net interest margin, a key measure of profitability, increased to 2.82% from 2.68%.
For the full year, the bank’s profit was up 16.3% at Rs.1328 crore.
Asset quality, however, continued to be under pressure with both gross and net NPAs registering an increase. Gross NPA ratio increased to 3.21% (3.17% in the year-ago period) and net NPA ratio was at 2.27% (2.21%). Advances grew 15%, deposits were up 12.78%.
OBC shares fell 2.72% to Rs.260.75 on BSE on Thursday.
Bangalore-based Canara Bank reported a 13% drop in net profit in January-March 2013 to Rs.725 crore mainly due to slow loan growth and also as provisions against bad loans increased.
Loan growth at 11% in 2012-13 was much slower than the 16% growth for the banking system. Provisions rose sharply to Rs.752 crore from Rs.462 crore in 2012.
Canara Bank shares closed down 0.60% to Rs.412.05 on BSE.
Public-sector lender Andhra Bank reported a marginal increase in net profit for the quarter ended 31 March on account of rising bad loans.
Andhra Bank posted a net profit of Rs.345 crore in three months ended 31 March, a jump of 1.5% from Rs.340 crore in the year-ago period. Total income grew 15% to Rs.3,713 crore from Rs.3,229 crore.
Net profit for the full fiscal year fell 4% to Rs.1289.13 crore, while total income grew 14% to Rs.13,957.11 crore.
Net NPAs soared 218% to Rs.2,409 crore from Rs.756 crore a year ago. The bank reported Rs.412 crore new NPAs in the fourth quarter.
“Increase in provision due to new NPAs, wage and pension settlements have led to compression of net profit,” chairman and managing director B.A. Prabhakar said. Shares of Andhra Bank gained 2.19% to Rs.93.20 on BSE.