Mumbai: Kotak Mahindra Bank Ltd reported a 12% increase in its first-quarter net profit on the back of increased lending.
Profit for the quarter ended June grew to Rs 282.45 crore from Rs 252.03 crore in the year-ago period. Total income rose 32% to Rs 2,056.98 crore.
One analyst with a local brokerage said the bank’s results reflected typical first-quarter slackness and that the rest of fiscal 2013 will be busy. Asset quality deterioration though is a worry as the bank typically has a stable record, he said, declining to be named.
Net interest income, or interest earned minus interest expended, rose 27% to Rs 721 crore. Advances grew 31% and deposits, 34%.
Net interest margin (NIM), the difference between yields on advances and cost of funds and a key profitability parameter, slipped from 4.9% to 4.7%.
Typically, NIMs range from 2-3%, making Kotak Bank’s NIM one of the highest in the Indian banking industry.
Low-cost savings bank account deposits grew 68% while the share of no-cost current account deposits in total deposits rose marginally. Current and savings account deposits accounted for 27% of the bank’s total deposits.
The asset quality deteriorated as gross non-performing assets (NPAs), or bad loans, rose to 1.39% of advances in the quarter against 1.16% a year ago. After provisioning, net NPAs were at 0.78% against 0.49% earlier.
According to Dipak Gupta, the bank’s joint managing director, bad debts were seen in the bank’s commercial segment that deals with infrastructure financing and commercial vehicles. Moreover, the bank does not prefer restructuring of assets, giving rise to NPAs, he said.
“We are seeing some delinquencies in the commercial segment. These are initial signs; but clearly, stress is building up in this segment,” Gupta said at a conference to discuss the bank’s results.
The bank’s management expects credit to grow above 20% and NIM to hover at the present level.
Kotak Mahindra Bank lost 2.51% to close at Rs 579.25 on Thursday on BSE, while the Sensex rose 0.55% to 17,278.85 points and the banking index, Bankex, gained 0.11% to end at 12,198.05 points.
Ashwin Ramarathinam contributed to this story.