BackKotak Mahindra Bank Q3 profit rises 36.56% to Rs634.7 crore
Net interest income jumps 66.6% to Rs1,766 crore from Rs1,060 crore in year-ago period
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Kotak Mahindra Bank Ltd on Monday said its net profit rose 36.5% from a year ago to ₹ 634.7 crore in the quarter ended December as it earned higher interest income and benefited from increased commissions and fees.
The earnings, however, are not strictly comparable to the year-ago period because its acquisition of ING Vysya Bank Ltd became effective only on 1 April 2015, the bank said in an exchange filing.
Kotak Mahindra announced its acquisition of the South-based ING Vysya Bank in an all-stock deal in November 2014 that made it the fourth largest lender by assets among private sector banks.
Net interest income (NII), or interest earned on loans minus that paid on deposits, increased two-thirds to ₹ 1,766 crore from ₹ 1,060 crore a year ago.
The higher NII was supported by stable net interest margin (NIM) and a 78% increase in advances. Sequentially, NII grew marginally by 5.18%. Growth in advances and deposits were boosted by the acquisition of ING Vysya Bank.
Disbursals to small businesses and retail loans such as mortgage loans drove credit growth, said Dipak Gupta, joint managing director of the bank.
“Large growth is coming from small businesses and our business banking segment and retail. These will be drivers of growth in future as well," Gupta told reporters.
The bank’s corporate loans and retail loans jumped 84% each, largely helped by the merger. ING Vysya Bank’s loan portfolio was dominated by disbursements to small and medium enterprises.
Kotak Mahindra Bank’s loans to large businesses grew by just 3.9% from the year-ago period. The share of retail loans in the total loan book rose marginally to 42% in the December quarter from 40% a year ago.
At the end of the quarter, Kotak Mahindra Bank’s advances were at ₹ 115,345 crore, while deposits totalled ₹ 130,939 crore. Average savings account growth at ING Vysya Bank branches was 31%, while that of Kotak Mahindra Bank branches was 41%, the exchange filing said.
Net interest margin (NIM) of the bank slipped to 4.3% for the December quarter from 4.7% in the corresponding quarter a year ago, owing to the acquisition.
“This reflects that we pay 6% rate on the additional savings deposit base of ING instead of the 4% that they used to pay. I think these (NIM) levels we should be able to maintain," said Gupta.
The bank’s non-interest income, including commissions and fees, increased to ₹ 722 crore from ₹ 494 crore in year-ago period.
The private lender was able to maintain asset quality despite additional stress from ING Vysya Bank.
Gross non-performing assets (NPAs) for the quarter stood at 2.3% of total loans, a fall of five basis points from the previous quarter but up compared with 1.87% in the year-ago period. One basis point is one-hundredth of a percentage point.
Net NPAs were 0.96% versus 0.97% in the year-ago period.
Provisions and contingencies for the quarter were ₹ 235 crore, compared with ₹ 30 crore in the year-ago period. A large part of the provisioning was due to the merger.
The bank said that internally a “bad bank" had been formed to manage about 6% of the stressed loans arising out of the ING Vysya acquisition.
“Recovery is slower than we expected it to be. We are finding the sale of assets difficult and, therefore, liquidations are not as great as what would one hope for," said Gupta.
The bank did not sell any bad loans to asset reconstruction companies and undertook no loan restructuring during the reported quarter.
Kotak Mahindra Bank shares on Monday slipped 1.3% to ₹ 667.15 apiece on BSE Ltd on a day the benchmark Sensex fell 1.09% to 24,188.37 points.
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