Kotak Mahindra Bank Q4 profit falls 7 pc to Rs 1,905 cr

Kotak Mahindra Bank on Wednesday reported 6.52 per cent fall in consolidated net profit for March quarter at Rs 1,905.18 crore due to multifold increase in provisions, and warned of asset quality issues building up in the unsecured lending space like credit cards and personal loans during the COVID-19 pandemic. The bank reported a profit of Rs 2,038.27 crore in January-March 2018-19.

It reported a net profit of Rs 1,951.82 crore from ordinary activities after tax before minority interest in the latest quarter. On standalone basis, the bank's post tax profit declined 10 per cent to Rs 1,266.60 crore during the quarter. In 2019-20, the profit grew 22 per cent to Rs 5,947 crore, as compared to the preceding fiscal.

Bank's executive vice chairman and managing director Uday Kotak said the unsecured retail lending category of loans will go through a period of stress going ahead, and the spectre of retrenchments will only make it more pronounced. He said the bank has been cautious about the segment for some time and also reduced its outstanding from the segment during the quarter.

Even though profit and loss account is important, the bank will focus on ensuring balance sheet strength and building confidence among people to continue getting deposits, he said, adding that from a sectoral perspective, it will stay off those sectors where leverage is high or fixed operating costs are high. The bank's overall loan book grew by over 6 per cent during FY20, and Kotak declined to give any target for the current fiscal. He, however, added that the only concern of the bank is to ensure that money gets returned and aspects like a credit guarantee from the government can help it.

The bank is sitting on excess liquidity at present and the same can be deployed as need be, he told reporters in an interaction minutes before Finance Minister Nirmala Sitharaman started her announcements. He made it clear that loans to the micro, small and medium enterprises sector is one such aspect where a sovereign backing can help it lend more.

Customer deposits grew 20 per cent in 2019-20, Kotak said, adding that even though there is a cost of carrying excess deposits in a time where loans are not being written as fast, it will never be allowed to slip into the negative spreads territory. From a provisioning perspective, where many banks have pro-actively upped the quantum of money being set aside, the bank has stuck to the regulatory requirements and taken a Rs 650 crore hit on COVID-19.

Chief financial officer Jaimin Bhat said 26 per cent of the bank's borrowers by loan amount understanding have opted for the RBI's loan moratorium as at April-end. For the latest quarter, the bank reported a net interest income of Rs 3,560 crore as against Rs 3,036 crore in the year-ago period, on the widening of net interest margin to 4.72 per cent. The other income rose to Rs 1,489 crore from the year-ago period's Rs 1,281 crore.

The overall slippages for the quarter came at Rs 491 crore, and the position was helped largely by the moratorium, which ensured Rs 660 crore of advances not slipping into non performing assets. The bank's overall gross non performing assets ratio stood at 2.25 per cent as against 2.14 per cent in the year-ago period.

The overall provisions including those for COVID-19 came at Rs 1,047 crore as against Rs 171 crore in the year-ago period. Kotak said the overall provisions are now higher than the net NPAs. The bank's capital adequacy came at 17.89 per cent with the core equity at 17.45 per cent. Kotak said there is a chance of consolidation in the financial services space as well and when an opportunity beckons, the bank wants to be ready with the money.

Bhat said the promoter family led by Uday Kotak has time till August 17 to decrease its holding to 26 per cent from 30 per cent in December 2019 as per a RBI mandate and the lender is working on various fronts to achieve the same. The share of the low cost current and savings account deposits has touched 56 per cent as of March 31 and Kotak said there is no plan to decrease the higher than peers' savings account offering of 4.50 per cent interest for deposits of over Rs 1 lakh.

The bank opened 14,000 accounts a day using digital alternatives in May 2020. The bank scrip closed 2.35 per cent up at Rs 1,186.50 on the BSE, as against gains of 2.03 per cent on the benchmark.