Rise in net interest income lifted Kotak Mahindra Bank Ltd.'s standalone net profit by just 4.8% year-on-year to Rs 3,344 crore, meeting the consensus estimate of Rs 3,424 crore of analysts tracked by Bloomberg. The profit rise was limited due to a sharp rise in provisions by the bank and deterioration in asset quality.
Net interest income or core income, rose 11% year-on-year for the bank and stood at Rs 7,020 crore. Provisions for the quarter stood at Rs 660 crore, up 80% year-on-year.
The private sector bank's asset quality deteriorated, with the gross non-performing assets ratio widening to 1.49% as of Sept. 30, compared to 1.39% in the previous quarter, but was lower than 1.72% a year ago. The net NPA ratio rose to 0.43% from 0.35% in the prior quarter and 0.37% a year ago.
"We are seeing stress in the unsecured loan book, mainly from the credit card business which is affecting GNPA and provisions," Chief Financial Officer Dewang Gheewalla said in the post earnings concall.
Fresh slippages rose to Rs 1,875 crore from Rs 1,358 crore a quarter ago and Rs 1,314 a year ago. Fresh slippages were upgraded within the same quarter to Rs 246 crore against Rs 250 crore a quarter ago. Dewang said that 30-40% of the bank's slippages are coming the credit card loan book.
Recoveries and upgrades were Rs 681 crore, lower than Rs 942 crore a year ago but higher than Rs 586 a quarter ago.
Credit costs also rose to 0.65% from 0.55% a quarter ago and 0.42% a year ago.
Kotak Mahindra Bank Q2 Earnings Highlights (Standalone)
Net Profit up 4.8% at Rs 3,344 crore. (Bloomberg estimate: Rs 3,424 crore).
Net interest income rose 11% to Rs 7,020 crore versus Rs 6,297 crore.
Net NPA at 0.43% versus 0.35% QoQ.
Gross NPA at 1.49% versus 1.39% QoQ.
A decline in the net interest margin also weighed on the bank's performance. The NIMs were 4.91% as of Sept. 30, lower than 5.02% a quarter ago and 5.22% a year ago.
The bank's advances increased 17% year-on year to Rs 4.2 lakh crore as of Sept. 30. Unsecured retail advances as a percentage of net advances were 11.3% against 11.6% a quarter ago.
"We have seen a slowdown in rural aspects of India, which has affected commercial vehicles and tractors, and we have seen some stress in the microfinance institution space as well as some overleveraging in personal loans and credit cards," Managing Director Ashok Vaswani said.
Among customer assets, the consumer segment, which contributes the most, rose 18% to Rs 1.92 lakh crore, followed by commercial and corporate, rising 14% and 13% on year, respectively.
The small-medium enterprises book of the bank grew 31% on year in the September quarter.
Total deposits rose 16% to Rs 4.46 lakh crore. The current account-savings account ratio was 43.6% at the end of September, against 43.4% a quarter ago and 48.3% a year ago.
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