Kotak Mahindra Bank Q2 profit falls but ahead of street estimates, NPA shrinks

Billionaire Uday Kotak-led Kotak Mahindra Bank reported better-than-expected results for the quarter ended September 30 while its asset quality also improved.

The private-sector lender reported a standalone net profit of Rs 2,032 crore for the second quarter, down from Rs 2,184 crore in the year-ago period even through earnings grew 24% from the first quarter.

Analysts had expected a double-digit decline in net profit due to higher provisions.

Standalone Net Interest Income (NII) for the second quarter increased to Rs 4,021 crore from Rs 3,897 crore a year earlier.

On a consolidated basis, profit after tax for the July-September was Rs 2,989 crore, a jump of 65% from Rs 1,806 crore for the first quarter and marginally up from Rs 2,947 crore for the corresponding period last year.

The company’s stock price rose nearly 2% after the results were declared.

Kotak Mahindra Bank Q2: Other highlights

1) Gross non-performing assets (GNPA) declined to 3.19% from 3.56% at the end of the first quarter. Analysts had expected GNPA to be closer to 3.5%.

2) Net NPAs declined to 1.06% as against 1.28% as of June 30.

3) COVID-19 provision was maintained at Rs 1,279 crore with no utilization during the first half of the fiscal year.

4) Total provisions (including specific, standard and COVID-19 related) stood at Rs 7,637 crore, or about 100% of GNPA with provision coverage ratio at 67%.

5) Customer assets, which include advances and credit substitutes, increased 17% year-on-year to Rs 256,353 crore.

6) Advances increased 15% to Rs 234,965 crore year-on-year and up from Rs 217,465 crore as of June 30, 2021.

7) Car finance unit Kotak Mahindra Prime’s profit tripled on a sequential basis and almost doubled year-on-year.

8) Life insurance arm contributed to consolidated profit as against a loss in the preceding three months even though it was lower compared to same quarter last year

9) Kotak Securities profit grew over 20% year on year.

Kotak Mahindra Bank commentary

The bank said the pandemic has impacted the lending business, distribution of third-party products, fee income from services or usage of debit and credit cards, and collection efficiency. It has also resulted in an increase in customer defaults and, consequently, an increase in provisions along with decrease of economic activity.

However, it added that the bank didn’t experience any significant disruptions during the pandemic and has considered the impact on carrying value of assets based on the external or internal information available up to the date of approval of the standalone financial results.

The future direct and indirect impact of COVID-19 on the bank, its operations, financial position and cash flows remains uncertain, the lender said, adding that its latest financial results do not include any adjustments that might result from the outcome of this uncertainty.