Kotak Bank net up 14% on lower provisions, surge in fee income

The fourth largest private sector lender Kotak Mahindra Bank Tuesday reported a 13.91 per cent jump in March quarter net income at Rs 2,038.27 crore at the consolidated level on a surge in non-interest income and lower provisioning which nearly halved. The city-headquartered lender booked a higher 25 per cent increase in the standalone net at Rs 1,407.80 crore as provisions for sour loans declined.

For the full fiscal 2019, it posted a net income of Rs 4,865.33 crore, up from Rs 4084 crore on a standalone basis, and Rs 7,204 crore as against Rs 6,200 crore at the consolidated level. Overall provisions almost halved to Rs 171.26 crore from Rs 306.91 crore, while gross non-performing assets improved to 2.14 per cent from 2.22 per cent a year ago.

The core net interest income grew 18 per cent to Rs 3,048 crore on a 21 per cent loan growth and a margin expansion to 4.48 per cent, while the other income grew marginally to Rs 1,270 crore. At a consolidated level, the bank reported the other income of Rs 5,847 crore, up from Rs 4,141 crore a year ago, largely on the back of booking a Rs 580 crore profit on a sale or revaluation of investment as against a Rs 462 crore loss in the year-ago period.

Executive vice-chairman Uday Kotak said the bank is targeting loan growth of over 20 per cent in FY20, despite expecting credit market difficulties due to liquidity issues. He is hopeful of maintaining net interest margin in the 4.2- 4.5 per cent range.

Share of the low-cost current and savings account deposits stood at 52 per cent. But this may not grow further as the bank had earlier this month slashed the pricing on its savings bank deposits to 4.5 per cent from 5 per cent, which was one of the highest in the industry. The bank is closely watching the developments in the auto sector, which has seen a volume slowdown, Kotak said, adding loans to end-consumers are safe but those to equipment- makers and vendors need to be looked at more closely now.

The bank is also cautious about the realty sector as it heads into the new fiscal, he said, adding exposure to both the commercial reality and to NBFCs has gone down as a percentage of the overall book during the year. The bank has been cautious about the small businesses segments throughout FY19 and is getting more confident of the segment lately, joint managing director Dipak Gupta said.

Kotak said the bank does not have any fund-based exposure to the bankrupt infra lender IL&FS, or to the grounded Jet Airways and also to the Anil Ambani group. For FY19, its credit costs printed at 0.47 per cent and it will be targeting for a marginal improvement from this in FY20, Kotak said.

The bank does not have any plan to sell its stake in the life insurance arm, whose embedded value has increased to Rs 7,306 crore from Rs 5,824 crore, Kotak said. On its ongoing case against the Reserve Bank on diluting the promoter shareholding, which will be next heard at the Bombay High Court after nine months, Kotak said the bank believes it is in compliance with the law of the land in letter and spirit.

The Kotak Bank scrip closed 0.65 per cent up at Rs 1,387.05 on the BSE, as against a flat closing of the benchmark with a negative bias..