Kotak Mahindra Bank Ltd seems to have fared well in the December quarter, reporting better-than-expected earnings on the back of strong growth in corporate banking and the treasury division.
In the December quarter, total advances grew 27% from a year ago, compared with 21% in the preceding quarter. While growth in auto loans improved slightly, the commercial vehicle and construction division saw a 7% drop sequentially as a slowing economy continued to hurt the segment. “We are not seeing an immediate recovery for the commercial vehicle and construction segment,” said Jaimin Bhatt, chief financial officer, Kotak Mahindra Bank.
Even the bank’s stand-alone net profit grew 31% from a year ago compared with a tepid 7.6% growth in the preceding quarter. Other income has grown 49% from a year earlier on the back of a mark-to-market loss reversal in investment and distressed assets, said the management in a conference call.
The bank posted a deposit growth of 34%, again, a sharp improvement from 24% seen in the year-ago quarter. It was also able to maintain its low-cost current and savings account deposit ratio at around 26%, thanks to a sharp increase in savings accounts even in the December quarter. As a result, net interest margin remained around 4.6%, narrowing only 10 basis points from the year-ago quarter.
Kotak Mahindra Bank subsidiaries—Kotak Mahindra Capital Co., Kotak Mahindra Asset Management Co. and Kotak Investment Advisors— posted a year-on-year drop in profit after tax even though the equity markets have performed well. Kotak Investment banking division did well compared with the same period last year because they IT managed three initial public offerings in the last quarter.
Kotak Mahindra outperformed the BSE Banking index in the past one year. The stock rallied 2% after it reported better-than-expected earnings and may continue to do well as it maintained its forecast of 25% growth and net interest margin remained above 4%.