In its first earnings report after its merger with ING Vysya Bank, Kotak Mahindra Bank reported a 26 per cent fall in consolidated net profit at Rs 517 crore in the June quarter, hit by massive provisions for the South India-based lender's stressed assets and retirement benefits.
On a standalone basis, the net profit plunged to Rs 190 crore in quarter under review from Rs 429 crore in the same period a year ago.
However, Kotak Mahindra Bank's Executive Vice-Chairman and Managing Director Uday Kotak claimed that ING Vysya Bank's (INGVB) book has turned out to be almost at par with expectations, and hinted at more setbacks on the asset quality front in the remaining quarters before the bank starts working normally.
"A significant amount of provisioning requirements of the combined company are behind us. Going forward, for the rest of three quarter between July and March, we expect incremental credit cost of about 0.50 per cent on the combined balance sheet," Kotak said.
He said that nearly six per cent of assets from INGVB were found to be in various categories of stress and have been transfered to the group's asset reconstruction company for redressal.
This resulted in a jump in provisions for bad assets at Rs 305 crore, which is around 0.30 per cent of the book. In the year-ago period, Kotak Mahindra Bank had provisions of Rs 14 crore for bad assets.
"This merger is extremely value accretive and we see significant benefits flowing through as we go into future," Kotak said, adding that normalisation will return from FY17.
Kotak Mahindra Bank bought out INGVB in an all-stock deal valued at Rs 15,034 crore last November, creating India's fourth-largest private sector bank.
