Last updated: 25 Jan, 2021 | 11:05 am
Profit beats estimates: The net profit grew 16% on-year to Rs 1,853 crore in Q3FY21, beating street expectations. Analysts had earlier anticipated a profit of about Rs 1,700 crore. The bank was able to post a higher profit on the back of a healthy rise in Net Interest Income and operating profit.
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 17% YoY to Rs 4,007 crore, against Rs 3,497 crore estimated by analysts. Net interest margin was at a steady at 4.51% for the quarter. The image below shows various important ratios for Kotak Mahindra Bank. (Source: Company Presentation)
Asset quality improves: The bank’s asset quality improved with the gross non-performing asset ratio reducing to 2.26% of total advances as against 2.55% in Q2. Net NPA ratio for the bank fell 39 basis points to 0.5%. The bank reported provisions and contingencies at Rs 599 crore as of Dec- 20, increasing sharply by 62.5% compared to previous quarter.
Update on moratorium: The RBI had permitted banks to offer a moratorium to borrowers until the end of August to help them mitigate the impact of the pandemic. Following this, the Reserve Bank of India in September permitted one-time restructuring of advances of companies and retail borrowers hit by the Covid-19 pandemic. While these assets don’t have to be marked as NPAs, banks have been asked to disclose details of the restructured assets.
Kotak Mahindra Bank said that GNPAs would have been 3.27% (vs 2.26%) and Net NPAs would have been 1.24% (vs 0.5%) had the bank classified Gross NPAs and Net NPAs otherwise.
Deposits: The Bank’s deposits aggregated to approximately Rs 2.65 lakh crore as of Dec-20, a growth of around 1.4% as compared to the previous quarter. Bank’s CASA (current and savings account) deposit now comprise 58.9% of total deposits of the bank. CASA capital is the cheapest source of capital for banks. The higher the number the more profit a bank can earn. Advances were up 4.5% on-year to Rs 2.14 lakh crore.
Despite the effects of the pandemic, Kotak Mahindra Bank has delivered strong results in the Oct-Dec 20 period. The bank has been able to maintain a healthy deposit and advances growth rate, on the back of a festive pick-up. However, on a year-on-year basis the bank’s loan book is down 1.2% reflecting the conservative strategy adopted by the bank since the onset of COVID-19 pandemic.
The asset quality of the bank has also shown improvement. However, these could be a rise in NPAs after the stay order on NPAs gets lifted. 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.
Despite a healthy set of numbers, Kotak Mahindra bank shares closed nearly 2% down this afternoon amid an overall market decline.