Kotak Bank consolidated pre-tax profit down 16.4% to Rs 2,435 cr in Q1

Total provisions and contingencies, including Covid-related provisions, rose to Rs 962 crore in Q1 FY21 compared to Rs 317 crore in the year ago quarter

Private lender Kotak Mahindra Bank reported a 16.4 per cent year-on-year (YoY) decline in consolidated pre-tax profit for the quarter ended June 2020 (Q1 FY21) at Rs 2,435 crore, from Rs 2,913 crore in the year-ago quarter due to additional provisioning made for Covid-related uncertainties.  

Net profit at the consolidated level stood at Rs 1,853 crore in Q1 FY21 versus Rs 1,932 crore in Q1 FY20, down 4 per cent.

The bank made additional Covid-related provisions to the tune of Rs 667 crore in the June quarter, of which Rs 616 crore additional provision was at the standalone level.

At a standalone level, the lender reported a 20 per cent decline in pre-tax profit at Rs 1,662 crore while net profit was down 8.5 per cent to Rs 1,244 crore. Net interest income of the bank came in at Rs 3,724 crore, up 17.8 per cent and its net interest margin (NIM) was down 8 basis points (bps) YoY and 22 bps sequentially to 4.40 per cent.

"NIMs have been squeezed as we shifted to safer lower yield investments in treasury operations," said Kotak Mahindra Bank Group CFO Jaimin Bhatt.

Advances were down 7 per cent sequentially to Rs 2.03 trillion while deposits were stable at Rs 2.61 trillion due to muted growth of current and term deposits. However, with savings deposit growing 34.5 per cent, the current and savings accounts (CASA) ratio went up 600 bps YoY to 56.7 per cent.

 The bank said it did not increase its book significantly. “The deposit side is healthy as we have seen significant growth in retail deposits. At this point of time, we believe it is safer to be cautious, and are waiting to see what the outcome of the Covid situation is and then we will press the accelerator on the lending side. Hence, the credit growth has been restricted,” said Dipak Gupta, joint managing director, Kotak Mahindra Bank.

Its loan book under moratorium declined to 9.65 per cent of total loans as on July 10 from 26 per cent at the end of April.  

Asset quality of the lender deteriorated in the reporting quarter with gross non-performing assets (GNPA) at 2.70 per cent, up 45 bps sequentially and 51 bps from June 2019 quarter. Net NPAs of the lender stood at 0.87 per cent, up 16 bps sequentially and 14 bps YoY.

Total provisions and contingencies of the lender, which includes the Covid provisions, rose to Rs 962 crore in Q1 FY21 compared to Rs 317 crore in the year ago quarter.

Kotak Mahindra Bank reported higher slippages to the tune of Rs 796 crore in Q1 FY21 compared to Rs 751 crore in June 2019 and Rs 491 crore in March 2020 quarter. The rise in slippages was driven by one corporate account which has not been recognised as an NPA, the management said.

The bank further said the economic slowdown and lockdowns have had an impact on certain business areas including new loan origination and collections, and could also result in a rise in credit costs. Capital adequacy ratio of the lender, as on June 2020 stood at 21.2 per cent with tier-I ratio at 20.6 per cent. During the quarter, it raised Rs 7,442 crore through a qualified institutional placement of 65 million equity shares.

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