Core income, better show by subsidiaries push Kotak Mahindra Bank net profit up 26%

Mumbai: Kotak Mahindra Bank on Thursday reported a 26 percent increase in June quarter net at Rs 1,346.82 crore, helped by an increase in core income and also on better show by subsidiaries. The fourth largest private sector lender’s standalone net jumped 23 percent to Rs 913 crore in the June quarter. Net of its car finance arm rose 10 percent to Rs 132 crore, that of securities doubled to Rs 125 crore and that of life insurance arm jumped 46 percent to Rs 103 crore. Core net interest income rose 17 percent to Rs 2,246 crore, while non-interest income increased to Rs 906 crore from Rs 733 crore. The bank incurred a Rs 63 crore hit due to marketing expenses for its new digital offering. [caption id=“attachment_3837761” align=“alignleft” width=“380”]  Reuters[/caption] Net interest margin narrowed by over 0.20 percent to 4.4 percent from the preceding quarter. Chief financial officer Jaimin Bhatt said introduction of the marginal cost of funds-based lending rate is putting pressure on the margins and the bank will end FY18 with a NIM of 4.2-4.3 percent. The bank notched a 19 percent growth in advances, helped by a 35 percent jump in loans to the commercial vehicles and construction equipment segments, while large corporate and consumer lending also grew, Bhatt said. However, he said there was a slowdown in the business banking segment where the book was flat, due to the impact of demonetisation and the pre-GST jittery among small businesses. Joint managing director Dipak Gupta expects the GST uncertainties to continue for at least two more months. On the asset quality front, the bank reported stable numbers, but said it has exposure to four of the 12 accounts identified by RBI to be resolved under the insolvency code but has made higher provisions on those accounts. Bhatt said the overall exposure is Rs 236 crore and the net NPA on the four accounts, which have entered into the loan book through the ING Vysya Bank merger, is Rs 46 crore. Its overall gross non-performing assets ratio stood stable at 1.07 percent, while the provisions grew to Rs 232 crore from Rs 213 crore. Overall capital adequacy ratio was above 19 percent and the bank continues to scout for opportunities on inorganic growth, stressed asset purchases and loan book increase. Sellers’ expectations on the pricing are an impediment on the stressed asset buys and it will take up to a year for an increase in transactions, Gupta said. The Rs 5,803 crore it raised through a share sale in April will be used to buy out its HV partner Old Mutual’s 26 percent in its life insurance arm, infuse capital into general insurance arm and also provide money for the infra debt fund which became operational during the June quarter, Bhatt said. The bank shares closed 1.44 percent down at Rs 980.40 on the BSE as against a 0.36 percent correction in the benchmark.