Last updated: 26 Jul, 2021 | 06:28 pm
Profit in-line with estimates: Kotak Bank reported a 32% year-on-year increase in net profits to Rs 1,642 crore in the quarter ended June, against Rs 1,244 crore in the same quarter last year. The rise in profits was mainly due to the rise in other income, which doubled to Rs 1583 crore compared to Rs 774 crore a year earlier. However, the bottom line was down 2.4% sequentially from Rs 1,682 crore last quarter. Analysts had estimated the profits to be around Rs 1,650 crore. Kotak Bank’s operating performance was sturdy as operating profit jumped 19% year-on-year to Rs 3,121 crore for the Apr-Jun quarter.
Net interest income rises: A bank’s primary business is to borrow money and lend the same at a rate higher than the rate at which they borrowed. The income generated from this differential is known as net interest income. Net interest income for Kotak Mahindra Bank grew 6% over the year earlier to Rs 3,942 crore during the Apr-June quarter compared to Rs 3,724 crore last year. However, sequentially NII decreased by 2.4% from Rs 3,843 crores last quarter.
Kotak Mahindra Bank Q1 earnings: Important Highlights
Asset quality declines: The bank’s asset quality worsened with gross NPA ratio for quarter ended June at 3.56% compared with 3.25% as of last quarter while Net NPA ratio marginally rose to 1.28% from 1.21% in the last quarter. Loans that are overdue for more than 60 days but are not NPA rose to Rs 430 crore from Rs 110 crore last quarter, indicating higher stressed assets. Provisions and contingencies in the quarter declined to Rs 935 crore from Rs 962 crore in the year-ago quarter. Total provisions held for the Apr-Jun quarter stood at Rs 7,445 crore, 94% of Gross NPA. Restructuring owing to the Covid-19 pandemic rose to Rs 552 crore in the Apr-Jun quarter from Rs 435 crore last quarter.
Deposits: CASA ratio for Apr-Jun quarter stood at 60.2% compared to 56.7 % last year. Average Current Account deposits grew by 28% to Rs 46,341 crore, Average Savings deposits grew by 10% to Rs 116,218 crore and Average TD Sweep grew by 24% to Rs 22,208 crore for the quarter ended June compared to the same quarter last year. CASA and Term Deposits below Rs 5 crore constituted 92% of total deposits. CASA capital is the cheapest source of capital for banks. The higher the number the more profit a bank can earn.
Advances: In terms of loan growth, the quarter was tepid for the bank affected by the second wave as well as its conservative approach. Advances in the quarter grew merely 6 % on-year, which was lower than many of its peers. Customer Assets (Advances and Credit substitutes) were Rs 2.35 lakh crore for Apr-Jun quarter compared to Rs 2.16 lakh crore last year. Advances for the quarter ended June were Rs 2.17 lakh crore compared to Rs 2.03 lakh crore last year. Sequentially, however, outstanding advances fell 2.7%. Credit card loans fell 11.4% over a year ago to Rs 3,848 crore. Corporate banking loans fell 3% year-on-year to Rs 59,731 crore.
Kotak Bank Q1 results Review:
Due to the effects of the pandemic, Kotak Mahindra Bank has delivered lackluster results for the quarter ended June. The asset quality of the bank declined, and there could be further rise in NPAs if the current pandemic situation prevails for a longer time. Capital adequacy ratio of the Bank as per Basel III as at June 30, 2021 was 23.1% and Tier I ratio was 22.2%. The bank is ramping up its digital banking services and saw a healthy growth in its online transactions for the April-June quarter. The bank witnessed 9.33X growth in acquired UPI transactions and 90% RDs and 81% FDs were booked through its Digital channels. Therefore, even though the current economic environment is extremely stressful for the Banking industry, Kotak Mahindra Bank has the necessary firepower to tide over these turbulent times. COVID related provisions as at June 30, 2021 were maintained at Rs 1,279 crore.