Kotak Mahindra Bank Q3 consolidated PBT rises 6.3%

Kotak Mahindra Bank posted a 6.26 per cent rise in consolidated profit before tax (PBT) at Rs 2,889.47 crore for the quarter ended December 2019 (Q3FY20), from Rs 2,719.30 crore in the year-ago quarter. 

The profit got impacted because of a one-time pension-related charge of around Rs 200 crore and higher provisioning and contingencies, which went up to Rs 472.6 crore at the consolidated level compared with a write-back of Rs 10.9 crore in the December 2018 quarter. 

The bank’s net profit rose 27.4 per cent to Rs 2,348.72 crore in Q3FY20, as against Rs 1,844.01 crore a year ago. At the standalone level, which represents banking operations, PBT at Rs 1,944 crore was down 1.35 per cent year-on-year (YoY). 

Credit grew at 10 per cent YoY. The bank’s joint managing director, Dipak Gupta, said, “When the nominal growth of the economy is not high enough, credit cannot grow because it is a function of the nominal growth rate.” He added that the lendable set of entities has shrunk. 

The bank has taken a cautious approach to lending. “It is very easy to lend today, but its impact will be felt two-three years down the line. When we lend, we only make 2 per cent, but if we lose, it is very near to 100 per cent of the loan,” Gupta said. 

While secured loans in retail — home and auto — are slowing, Kotak Mahindra Bank is applying brakes on unsecured loans. Overall, credit should grow in “mid-teens”, Gupta added. 

The net interest income on a standalone basis increased 17 per cent to Rs 3,430 crore. Net interest margin for the quarter was at 4.69 per cent, from 4.31 per cent in the year-ago quarter, and 4.61 per cent in the September quarter. 

On the asset quality front, gross non-performing assets (NPAs) for Q3FY20, on a standalone basis, rose to 2.46 per cent from 2.32 per cent in the September 2019 quarter. A year ago, it was 2.07 per cent. 

Slippages in the quarter were about Rs 1,062 crore, a third of which came from corporate entities. While there are no fresh special mention accounts (SMAs), some of the existing SMAs fell into NPA. 

“Every quarter new bullets in the realm of unknown unknowns are getting discovered. These are newer entities, not the known knowns,” Gupta said. Some of the unknown unknowns were governance-related, some were because of accounting, regulatory, or arising out of judicial issues, he added. 

The bank’s overall deposits grew about 15 per cent and the share of current and savings accounts (CASA) stood at 53.7 per cent at the end of the quarter, up 300 basis points from the December 2018 quarter. “We consciously focused on growing the CASA and not letting high-cost deposits pile up,” said Jaimin Bhatt, CFO of the bank. 

Total consolidated income was up 19.34 per cent YoY to Rs 13,542.43 crore. The bank’s capital adequacy ratio stood at 18.2 per cent, while tier I ratio was at 17.7 per cent. Shares of the bank were down 4.7 per cent to Rs 1,618 on the BSE. 

Disclosure: Entities controlled by the Kotak family have a significant holding in Business Standard Pvt Ltd

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