Kotak Bank Group Q2 net flat at Rs 2,989 cr as loan quality worsens; subsidiaries report robust numbers
Diversified financial services player Kotak Mahindra Bank Group on Tuesday reported a flat consolidated net income of 2,989 crore for the September quarter as against Rs 2,947 crore a year ago, hit by worsening asset quality and higher operational costs, even though subsidiaries reported robust earnings.
Diversified financial services player Kotak Mahindra Bank Group on Tuesday reported a flat consolidated net income of 2,989 crore for the September quarter as against Rs 2,947 crore a year ago, hit by worsening asset quality and higher operational costs, even though subsidiaries reported robust earnings. On a standalone basis, the fourth largest private sector lender reported a near 7 per cent fall in earnings at Rs 2,032 crore in Q2 of FY22, from Rs 2,184 crore a year ago, on higher credit cost and resultant provisions. The bank accounted for 68 per cent of the group's bottomline for the quarter, while the subsidiaries and associates chipped in with the remaining 32 per cent, it said. Total consolidated income rose to Rs 15,341.65 crore from Rs 13,548.33 crore earlier. The bank saw its asset quality worsening in the quarter. Gross NPAs spiked to 3.19 per cent or Rs 8,564.19 crore, from 2.55 per cent or Rs 6,055 crore a year ago. Net NPAs jumped to 1.06 per cent or Rs 2,897 crore from 0.7 per cent or Rs 1,637 crore. This had the credit cost on advances rising 63 bps, leading to higher provisions for bad loans and contingencies which rose to Rs 424 crore from Rs 333.22 crore in the year-ago quarter. The bank's gross slippages stood at Rs 1,293 crore, up from Rs 1,350 crore a year ago, while recoveries and upgrades stood at Rs 750 crore. Sequentially, slippages improved from Rs 1,537 crore in the June quarter. The bank maintained Rs 1,279 crore in pandemic-related provisions and restructured Rs 495 crore or 0.21 per cent of retail and small business loans under the second restructuring scheme announced by the central bank. Total assets restructured under the pandemic scheme was Rs 767 crore or 0.33 per cent of advances, Jaimin Bhatt, Kotak Mahindra Bank president and chief financial officer, told reporters. Yet the bank maintained a high capital adequacy ratio of 21.8 per cent and a tier-1 ratio of 20.8 per cent. Bhatt attributed the growth to other income of Rs 2,721.34 crore, up from Rs 2,085.82 crore and the robust show by subsidiaries. He said the corporate loans segment is still lacklustre as large corporates are yet to resume capital expenditure, and added that he does not see the same reviving in the medium term. Whatever corporate loan demand is coming in is mostly working capital loans or loans for refinancing, he noted.
Deputy Managing Director Deepak Gupta said the standalone numbers are lower as the operating expenses and employee cost increased as loan sales improved, especially on home loans (a third of which was refinance/ takeovers) and other mortgages along with personal loans. Interest income declined to Rs 8,225.63 crore in the reporting quarter from Rs 8,312.79 crore a year ago, while income from investments rose marginally to Rs 2,450.41 crore from Rs 2,419.14 crore. Overall, other income rose to Rs 7,116.02 crore from Rs 5,235.54 crore, most of which came from revaluation of the insurance business which rose to Rs 1,413.13 crore from Rs 681.65 crore. Operating expenses rose to Rs 8,096.37 crore at the group level from Rs 5,918.21 crore, of which employees cost rose to Rs 1,853.02 crore from Rs 1,496.56 crore. Net interest income for the quarter increased 3 per cent to Rs 4,021 crore on-year, while the key profitability gauge net interest margin (NIM) stood flat at 4.45 per cent, pushing up total income by 9 per cent to Rs 5,833 crore. Total income grew because advances rose 15 per cent, driven by mortgages, mainly home and retail loans. Total outstanding advances rose to Rs 2,34,965 crore from Rs 204,845 crore in the September 2020 quarter and Rs 2,17,465 crore in the three months to June 2021, Bhatt said. The low cost CASA (current account savings account) deposits ratio rose to 60.6 per cent from 57.1 per cent. Of this, current account deposits grew 32 per cent to Rs 53,280 crore from Rs 40,454 crore in September 2020, while savings deposits rose 13 per cent to Rs 1,23,479 crore from Rs 1,08,990 crore. Term deposits climbed 20 per cent to Rs 24,151 crore from Rs 20,184 crore. Total assets managed/advised by the group stood at Rs 3,81,058 crore, up 40 per cent from Rs 2,71,769 crore in September 2020. Kotak Securities had its best-ever numbers at Rs 243 crore of net profit in the reporting quarter, up from Rs 199 crore a year ago, thanks to the massive rally in the market. Its NBFC arm Kotak Mahindra Prime logged in Rs 240 crore of net income from Rs 133 crore earlier; Kotak AMC reported Rs 97 crore as against Rs 84 crore; Kotak Mahindra Investments at Rs 89 crore versus Rs 74 crore; and another NBFC Kotak Mahindra Capital Company saw its net income jumping to Rs 58 crore from Rs 14 crore a year ago. Only Kotak Mahindra Life Insurance had lower profit at Rs 155 crore in the reporting quarter, down from Rs 171 crore, due to the higher claims from pandemic victims. The Kotak Mahindra Bank counter closed 2.48 per cent up at Rs 2,210.55 on BSE whose benchmark Sensex ended 0.63 per cent higher at 61,350.23.
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