Kotak Mahindra Bank Q2 results update
Last updated: 26 Oct, 2020 | 09:44 am
Standalone Results in a snapshot:
Source: Company Presentation
Profit beats estimates: The Net profit grew 26.7% on-year to ₹2,185 crore in Q2FY21, beating street expectations. Analysts had earlier anticipated a profit of about ₹1,600 crore. The bank was able to post a higher profit on the back of lower provisions and a healthy rise in Net Interest Income.
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 or Core Income. Net interest income for Kotak Mahindra Bank grew 16.8% YoY to ₹3,913 crore. The bank’s net interest margin stood at a healthy 4.58%.
Asset quality improves: The bank’s asset quality improved with the gross non-performing asset ratio reducing to 2.55% of total advances as against 2.7% in Q1. Net NPA ratio for the bank fell 23 basis points from the previous quarter to 0.64%. The bank’s provisions for the quarter fell to ₹368.6 crore as against ₹962 crore in the 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 if the bank were to not take into account this order, the Gross NPA’s would have risen to 2.7% (from 2.55%) and Net NPA’s would have been 0.74% (as against 0.64% now). The bank has, however, made appropriate provisions for the same.
Deposits: Kotak Bank’s deposits remained flat at 2.61 lakh crore as at the end of Q2. The Bank’s CASA (current and savings account) deposit now comprise 57.1% 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 rose marginally to ₹2.17 lakh crore as against 2.16 lakh crore in the previous quarter.
Despite the effects of the pandemic, Kotak Mahindra Bank has delivered strong results in the Jul-Sep period. The bank was able to beat market expectations primarily due to a fall in provisions and a rise in its core income. The asset quality of the bank has also shown improvement. The bank’s capital adequacy ratio (23.4%) remaind well above the regulatory requirements. Even though the current economic environment is extremely stressful for the Banking Industry, we believe that Kotak Mahindra Bank has the necessary firepower to tide over these turbulent times.