BackKotak profit up as other income surges; bank announces bonus
Profit grows on the back of a sharp rise in earnings from fees and commissions the bank charges its customers
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Mumbai: Kotak Mahindra Bank Ltd on Tuesday said its stand-alone net profit for the quarter ended 31 March rose 30% on the back of a sharp rise in earnings from fees and commissions the bank charges its customers.
Net profit rose to ₹ 527 crore, up from ₹ 407 crore in the corresponding period last year. The profit was higher than Bloomberg’s poll of 14 brokers that estimated it at ₹ 498 crore.
On a consolidated basis, the bank’s net profit increased 38% to ₹ 913 crore from ₹ 663 crore last year, riding on profit growth from the lender’s brokerage, investment banking and car financing business.
Other income—the income the bank earns from fees and commissions—on a stand-alone basis increased 96% to ₹ 668 crore from ₹ 340 crore in 2014. These fees include those earned by selling mutual funds and insurance, foreign exchange and debt market syndication.
Vice-chairman and managing director Uday Kotak said demand for loans from companies was faster than that from individuals and small businesses, and the expectations are that corporate demand will pick up in the second half of the current fiscal year.
“Corporate loan demand was led by working capital and transaction banking this year, but we expect some demand for loans to pick up for project financing in the second half of the current fiscal," Kotak said.
Net interest income, the income earned from loans and that paid on deposits, increased 16% to ₹ 1,123 crore from ₹ 967 crore last year.
The bank also announced a bonus issue of one equity share for every one held in the bank subject to shareholder approval at the annual general meeting later this year. Kotak’s last bonus issue was in 2005.
The bonus issuance follows the acquisition of Bangalore-based ING Vysya Bank Ltd in an all-stock deal in November. The process of the amalgamation of the two banks was completed on 1 April.
Kotak said the bonus was on the occasion of the lender’s 30th anniversary this year. “This is a reward for many shareholders who have stuck with us for these 30 years and it is also our way of welcoming the ING Vysya shareholders," Kotak said.
The results got a thumbs up from the stock market as the Kotak stock was a top performer on Tuesday, gaining 6.54% to close at ₹ 1,423.65 a share on the BSE, even as the Sensex lost 0.18% to close at 27,440.14 points and the banking index, Bankex, lost 0.17% to close at 21,196.02 points.
Manish Ostwal, an analyst at Nirmal Bang Securities Pvt Ltd, said he was surprised by the bank’s good results, especially the performance of the lender’s brokerage and investment banking businesses.
Net profit at Kotak Securities Ltd, the bank’s brokerage business, more than doubled to ₹ 96 crore in March 2015 from ₹ 44 crore in March 2014, while Kotak Mahindra Capital Co. Ltd, the investment banking arm of the bank, reported a net profit of ₹ 30 crore, a six times increase from ₹ 5 crore last year and after a ₹ 6 crore loss in the quarter ended December 2014.
“The management has guided for a 20% growth of the merged entity and looking at the performance this quarter and the advantages the ING merger is going to bring in terms of opportunities in the south, Kotak’s earnings are only likely to go higher from here," Ostwal from Nirmal Bang said.
Kotak Mahindra will also apply to start its general insurance company by the second half of this fiscal and is in talks with its foreign life insurance partner Old Mutual Plc’s to up its stake to 49% from 26%.
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