BackKotak Mahindra Bank Q3 profit up 21% riding on other income
Profit increase mainly because of higher net interest income, other income and lower provisions
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Mumbai: Kotak Mahindra Bank Ltd on Tuesday said consolidated net profit in the December quarter rose 21% to ₹ 717 crore from ₹ 591 crore in the same period a year ago, on higher fees from debt markets, foreign exchange trading and mutual fund distribution.
Demand for loans from companies, small businesses and agriculture also helped the bank earn higher income. However, profit was lower than the median estimate of ₹ 757 crore forecast by seven analysts polled by Bloomberg.
Consolidated other income, including fees but not including premium and investments in the insurance business, rose 43% from a year ago to ₹ 742 crore.
Besides other income, the bank also made money by giving loans and was helped by a write-back from provisions made previously on government debt investments.
Net interest income (NII), or interest earned on loans minus interest paid for deposits, increased 13% to ₹ 1,579 crore from the previous year’s ₹ 1,399 crore.
Overall provisions and contingencies for the quarter fell 34% to ₹ 42 crore compared with ₹ 64 crore last year.
Although the economy is looking up, the situation hasn’t really changed for the bank in some sectors such as loans given for trucks and buses, according to joint managing director Dipak Gupta.
“Commercial vehicle loan growth has been negative for the last two-and-a-half years, but we are seeing initial signs of a corporate loan pickup," Gupta said. “Once the corporate loans move we may also see increase in growth in the commercial loans (to small businesses)."
Gupta said he expects the bank to get some non-fund-based exposure, especially due to the telecom spectrum auctions coming up next month.
In the quarter ended 31 December, the bank saw a 33% rise in corporate loans and a similar quantum of rise in loans to small businesses. On a standalone basis, the bank’s loans rose 22% to ₹ 64,641 crore in December from ₹ 53,149 crore a year ago.
However, on a consolidated basis, the net interest margin, or the difference between the yield on advances and the cost of deposits, dropped to 4.7% from 4.9% a year ago.
Gupta expects the bank’s margin to remain around 4.5%.
Net non-performing assets (NPAs) were stable at 0.83% of the loan book, versus 0.92% the previous year.
Besides the drop in margin, the bank’s numbers were solid, according to Kajal Gandhi, assistant vice-president at Icicidirect.com, the retail broking arm of ICICI Securities Ltd. “Maybe the drop in margin was also because of the growth in agriculture loans, which are not that high-yielding," she said.
Among its subsidiaries, Kotak’s mutual fund business swung to a loss in the quarter because a rise in assets under management resulted in the company paying upfront commissions to distributors.
In November, Kotak Mahindra Bank announced the acquisition of ING Vysya Bank Ltd in an all-stock transaction that will create India’s fourth largest private sector lender with ₹ 1.2 trillion of assets and 10 million customers.
Gupta said the bank had applied for approval from the Competition Commission of India and the Reserve Bank of India, which it expects to receive in two months.
The lender’s shares ended at ₹ 1,396 on BSE, up 0.52%. The benchmark Sensex index was up 1.85% at 28,784.67 points.
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