Kotak Mahindra Bank Q3 consolidated net up 11% at Rs 2,602 cr on robust NII

Asset quality improves both YoY and sequentially; bank has also granted one-time recast of borrowers under RBI resolution framework, amounting to 0.28 per cent of its net advances

Private sector lender Kotak Mahindra Bank’s consolidated net profit jumped 11 per cent to Rs 2,602 crore in the October–December (Q3) of FY21, from Rs 2,349 in the corresponding quarter of FY20. On a standalone basis, the bank’s net profit jumped 16 per cent in Q3FY21 to Rs 1,854 crore, compared to Rs 1,596 crore in Q3FY20 due to healthy rise in net interest income (NII) and lower provisions.

NII, the difference between the interest income the bank earns from its lending activities and the interest it pays to its depositors, of the lender grew 17 per cent in the reporting quarter to Rs 4,007 crore, compared to Rs 3,430 crore in the corresponding period of FY20. And, the net interest margin stood at 4.51 per cent versus 4.69 per cent in the year ago period.

Provisions and contingencies of the lender on a standalone basis for the reporting quarter stood at Rs 599 crore, compared to Rs 444 crore in Q3FY20. In the preceding quarter (Q2FY21), the bank’s provision and contingencies were to the tune of Rs 368 crore. At the end of Q3FY21, the bank is holding Rs 1,279 crore as covid related provisions.

Asset quality of the lender has improved both year-on-year (YoY) and sequentially. In Q3FY21, gross non-performing assets (NPAs) of the lender stood at 2.26 per cent, compared to 2.55 per cent in the preceding quarter and 2.46 per cent in the year ago quarter (Q3FY20). Net NPAs of the bank also followed the same trajectory and stood at 0.5 per cent at the end of Q3FY21.

But, had the bank classified the assets which were more than 90 days overdue as NPAs, if not for the Supreme Court’s interim order of standstill on classification of assets, its gross NPAs would have stood at 3.27 per cent and net NPAs would have stood at 1.24 per cent. This is higher than that reported in the September quarter. At the end of Q2FY21, bank’s proforma gross NPAs stood at 2.27 per cent and net NPAs at 0.74 per cent.

“As a matter of prudence, the bank has made additional provisions (including interest accrued) as at 31st December 2020 of Rs 814 crore on such advances including Rs 722 crore for this quarter”, it said.

The bank has also granted one-time restructuring requests of borrowers under the resolution framework of the RBI. As of December 2020, the bank has granted one-time restructuring requests of 0.28 per cent of its net advances.

While advances of the lender declined marginally year-on-year, they grew a little over 4 per cent sequentially to stand at Rs 2.14 trillion. As far as deposits are concerned, the lender's CASA ratio improved to 58.9 per cent as of December 2020. Furthermore, the average savings deposits with the bank grew 29 per cent to Rs 1.07 trillion and average current account deposits grew 13 per cent to Rs 37,533 crore.

The bank on a standalone level maintained a healthy capital adequacy ratio of 21.5 per cent at the end of December quarter, with tier I ratio at 20.9 per cent.

The bank’s shares have fallen 1.49 per cent to Rs 1,804 on the BSE post the result announcement.

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