Kotak Mahindra Bank June Quarter Profit Drops 8.5%, Asset Quality Deteriorates

Kotak Mahindra Bank on Monday reported an 8.51 per cent decline in net profit to Rs 1,244.45 crore in the quarter ended June 30. the private sector lender had reported a net profit of Rs 1,360.20 crore in the corresponding period a year ago. Shares in Kotak Mahindra Bank - the country's second largest private sector lender by market capitalisation - fell nearly 3 per cent after the earnings announcement.

In a regulatory filing, Kotak Mahindra Bank said its total income stood at Rs 7,685.40 crore in the April-June period, making a decline of 3.26 per cent compared with the year-ago period. 

Kotak Mahindra Bank's asset quality worsened.

Its gross non-performing assets (NPAs) - or bad loans - as a percentage of total loans came in at 2.70 per cent in the first quarter of financial year 2020-21, as against 2.25 per cent in the previous quarter, and 2.19 per cent in the quarter ended June 30, 2019.

Total provisions for bad loans jumped more than three-fold to Rs 962.01 crore, according to Kotak Mahindra Bank. Kotak Mahindra Bank said it made COVID-19-related general provisions of Rs 616 crore in the quarter ended June 30.

Net NPAs increased to Rs 1,777.10 crore in the April-June period, from Rs 1,557.89 crore in the previous quarter, and Rs 1,524.38 crore in the quarter ended June 30, 2019.

However, its net interest income - or the difference between interest earned and interest expended - increased 17.81 per cent to Rs 3,723.85 crore. the bank's operating profit - or profit before taking into account the provisions and contingencies - rose 9.37 per cent to Rs 2,623.71 crore.

Its net interest margin - a key measure of profitability - was at 4.4 per cent in the latest quarter, as against 4.49 per cent in the year-ago period. 

Asset quality of the country's banks is expected to take a severe hit due to the coronavirus-led economic crisis. The country's central bank has warned the bad loans in the banking system could soar to almost 15 per cent of total loans by March 2021.

At 2:58 pm, Kotak Mahindra Bank shares traded 2.07 per cent lower at Rs 1,322 apiece on the BSE, underperforming the benchmark Sensex index which was down 0.20 per cent amid volatile trade.