Kotak Mahindra Bank's consolidated net profit up 31% YoY in Q3

Standalone net profit up 15% YoY aided by higher NII and write back of provisions

Kotak Mahindra Bank’s consolidated net profit increased 31 per cent year-on-year (YoY) to Rs 3,403 crore in the October–December quarter (Q3) of FY22. Its net profit for the year-ago quarter stood at Rs 2,602 crore.

On a standalone basis, which reflects the bank’s lending operations, the private sector lender reported a 15 per cent YoY increase in net profit to Rs 2,131 crore in Q3FY22, beating street estimates, due to higher net interest income and write back of provisions. Bloomberg analysts had estimated a net profit of Rs 2,074 crore for the bank. In the year-ago period, the bank had reported a net profit of Rs 1,854 crore.

Its net interest income (NII), the difference between interest earned and expended, stood at Rs 4,334 crore, up 12 per cent YoY from Rs 3,876 crore in the year-ago period. Net interest margin, a measure of profitability of banks, stood at 4.62 per cent, 17 basis points (bps) higher than 4.45 per cent it had reported in the preceding quarter, and 26 bps higher than 4.36 per cent posted in the year-ago period.

The bank has written back Rs 279 crore in Covid provisions, resulting in a provision and contingency write-back of Rs 131 crore in the third quarter. In comparison, it had made provisions of Rs 424 crore each in the year ago and sequential quarters.

Despite the write-back of some Covid provisions, the bank is holding Covid-related provisions to the tune of Rs 1,000 crore at the end of December 2021 quarter. The total provisions held by the bank, which includes specific, standard, and Covid-19 related provisions, stood at Rs 7,269 crore at the end of December quarter.

Asset quality has improved sequentially, with the bank reporting gross non-performing assets (GNPAs) of 2.71 per cent in Q3FY22 against 3.19 per cent in Q2FY22. Net NPAs also declined sequentially by 27 bps to 0.79 per cent. In absolute terms, GNPA was down by Rs 675 crore to Rs 6,983 crore, and net NPA was down by Rs 487 crore to Rs 2,004 crore in Q3FY22.

Slippages for the quarter stood at Rs 750 crore whereas recoveries and upgrades were to the tune of Rs 1,086 crore. In the year-ago period, the proforma (due to the dispensation given to banks) GNPA ratio was 3.27 per cent and net NPA was 1.24 per cent.

“We have seen improvement in asset quality on all fronts. The actual increment in GNPAs was lower so we had a negative growth on GNPAs, on the back of better recoveries. We also saw a small Special Mention Account (SMA) number and the restructuring was pretty small,” said Jaimin Bhatt, president & group CFO, Kotak Mahindra Bank.

The lender has restructured loans worth Rs 348.65 crore under the Reserve Bank of India’s second Covid restructuring scheme. In accordance with Covid and MSME resolution frameworks announced by the RBI, the bank has standard restructured fund-based outstanding of Rs 1,364 core, or 0.54 per cent of advances as at December 31, 2021.

As far as credit growth is concerned, the bank’s advances grew 18 per cent YoY and 7.7 per cent sequentially to Rs 2.53 trillion, led by the consumer vertical loans with 29 per cent YoY growth. The home loan and loan against property segment has shown 38 per cent YoY growth. The unsecured retail segment which the bank had slowed down earlier has grown in double digits. Customer assets, which include advances and credit substitutes, increased by 20 per cent YoY to Rs 2.75 trillion.

“We have talked in the past about going for growth and the bank has continued to pursue growth in this period,” said Bhatt.

“Unsecured for us is a small base. It is 5-6 per cent of our total advances. It is still cautious optimism (for us). But the opportunity is huge,” said Dipak Gupta, joint managing director, Kotak Mahindra Bank.

Total deposits were at Rs 3.05 trillion, up 15 per cent YoY. The ratio of current account, savings account deposits stood at 59.9 per cent, 70 bps lower sequentially.

Disclosure: Entities controlled by the Kotak family have a significant holding in Business Standard Pvt Ltd