Life insurance claims drag Kotak Bank's consolidated net; lender profit up 32 pc

The overall growth in advances came in at 6.60 per cent, and it was a widening of the net interest margin to 4.60 per cent which helped it post a 6 per cent jump in the core net interest income at Rs 3,942 crore.

Kotak Mahindra Bank on Monday posted a post-tax net profit of Rs 1,806 crore on a consolidated basis for the June quarter, as against Rs 1,853 crore in the year-ago period, dragged down by a Rs 243 crore loss by its life insurance arm on higher claims. On a standalone basis, a jump in other income helped the private sector lender post a 32 per cent growth in net profit at Rs 1,642 crore. The lender also witnessed a spurt in asset quality issues amid the second wave of the pandemic, with half of the new stress emanating from an inability to reach the borrowers in segments like commercial vehicles and microfinance to collect loan repayments because of the localised lockdowns. Its slippages came in at Rs 1,500 crore, as against the usual rate of under Rs 1,000 crore, its Joint Managing Director Dipak Gupta said. Advances overdue for between 61-90 days also grew to Rs 430 crore at the end of the quarter from Rs 110 crore in March, but the bank management said it is a small number in the overall loan book of over Rs 2 lakh crore. The bank's gross non-performing assets ratio moved up to 3.56 per cent from 3.25 per cent in March and 2.70 per cent in the moratorium period last year. Its overall provisions stood at Rs 934.77 crore as against Rs 962.01 crore, implying a credit cost of 1.3 per cent. Gupta said the overall credit cost for the fiscal year will be between FY21’s 0.84 per cent and 1.3 per cent. It continues to hold excess provisions of Rs 1,279 crore and did not dip into it as larger rivals have done. Gupta explained that while unsecured retail book was stressed in the first wave of the pandemic, it is broader right now. Also, the corporate book performing well is a silver lining, he said, adding that many such borrowers are prepaying leading to lower credit growth. The overall growth in advances came in at 6.60 per cent, and it was a widening of the net interest margin to 4.60 per cent which helped it post a 6 per cent jump in the core net interest income at Rs 3,942 crore. Gupta said the bank, which had opened up the credit growth tap after the abatement of the first wave last November, will be ''circumspect'' on the credit growth side going forward given the worries about a third wave. Other income doubled to Rs 1,583 crore from the Rs 771 crore in the year-ago period, led by a jump in commissions business. Dividend payouts by subsidiaries of over Rs 150 crore also helped this income line. The bank's market share in the home loan segment continues to be insignificant and it will continue with the aggressive rate offerings on it, Gupta said. The share of the low-cost current and savings account advances stood at over 60 per cent. Its overall capital adequacy was 23.7 per cent with the core tier-I ratio at 22.8 per cent. Among the subsidiaries, Kotak Securities posted a net profit of Rs 236 crore as against Rs 169 crore, Kotak Asset Management & Trustee Company had its net growing to Rs 107 crore from Rs 71 crore, Kotak Mahindra Prime went up to Rs 79 crore from Rs 68 crore, while Kotak Mahindra Life Insurance posted a Rs 243 crore loss as against a profit of Rs 161 crore in the year-ago period. Its Chief Financial Officer Jaimin Bhatt explained that the bank had already warned investors about a dip in profit in the life insurance business because of the higher claims and the numbers did play out as feared. The bank scrip closed 1 per cent up at Rs 1,740.40 apiece on the BSE, as against a 0.23 per cent correction on the benchmark.