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Kotak Mahindra Bank announced a significant surge in its net profit for the June quarter, reporting an 81% year-on-year jump to Rs 6,249 crore. This impressive performance was primarily attributed to the sale of a majority stake in its subsidiary, Kotak General Insurance. The bank exceeded market expectations, as Bloomberg estimates had placed the profits at Rs 3,760 crore.
The bank completed the sale of a 70% stake in Kotak Mahindra General Insurance to Zurich Insurance Company on June 18. This divestment brought in gains of Rs 2,730 crore, significantly contributing to the overall profit increase. Excluding these gains, the bank's profit after tax stood at Rs 3,520 crore for the quarter.
The bank's CEO, Ashok Vaswani, highlighted the positive growth across all business segments, emphasizing the value-accretive nature of the insurance divestment for shareholders. However, the bank has been facing regulatory challenges, as the Reserve Bank of India (RBI) had barred it from issuing fresh credit cards and onboarding new customers through digital channels. The bank has since developed a plan to address these issues, engaging an external auditor with RBI approval to rectify the outstanding matters.
Despite the regulatory hurdles, Kotak Mahindra Bank demonstrated strong performance in its core banking operations. Net interest income increased by 10% to Rs 6,842 crore during the June quarter, while other income rose 9% year-on-year to Rs 2,929 crore. The bank's asset quality also improved, with gross non-performing assets (GNPA) declining to 1.39% from 1.77% in the same period last year. Net NPA also saw a decrease to 0.35% from 0.44% in the previous year.
The bank's expansion plans include the opening of 200 new branches in the current financial year. Advancements have grown by over 20% year-on-year to Rs 4.05 trillion as of June 30, 2024, while deposits have risen by 21% year-on-year to Rs 4.35 trillion at the end of June 2024. The share of low-cost deposits, Current Account and Savings Account (CASA), declined slightly to 43.4% at the end of June 2024 compared to 49% at the end of June 2023.
While the earnings were generally in line with expectations, there were some areas of concern. The net interest margin (NIM) compressed to 5.02% in the quarter, down from 5.57% in the same period last year and lower than the 5.28% recorded in the January-March quarter. Deposit growth was also below expectations, primarily driven by a decrease in CASA, although term deposit growth remained healthy. Loan growth, however, remained strong, led by an increase in corporate loan growth.
Overall, Kotak Mahindra Bank demonstrated a robust performance in the June quarter, driven by the insurance stake sale. The bank remains focused on addressing regulatory challenges and expanding its operations, aiming for continued growth in the coming periods.
Source: Kotak Mahindra Bank’s profit surges 81% helped by stake sale in insurance arm