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Kotak Mahindra Bank, a leading private sector lender in India, reported a 5% rise in its standalone net profit for the second quarter of the current fiscal year, reaching Rs 3,344 crore. This positive performance was driven by robust growth in net interest income and an improvement in asset quality. However, the net profit fell short of Bloomberg analysts' expectations, who projected Rs 3,424 crore for the quarter.
Despite a significant increase in provisions, which jumped 80% to Rs 660 crore, the bank's net interest income experienced a healthy 11% growth, reaching Rs 7,020 crore. This growth was attributed to the bank's ability to effectively manage its interest rate exposure and capitalize on opportunities in the market. However, the bank's net interest margin (NIM) faced pressure, declining to 4.91% from 5.22% a year ago.
The decline in NIM was attributed to a slowdown in unsecured business, specifically credit cards, due to the Reserve Bank of India's (RBI) embargo on new credit card issuances. This embargo impacted the bank's earnings on assets, leading to a decrease in NIM. The bank's management indicated that 30-40% of the slippage in the second quarter originated from credit cards.
Despite challenges in the unsecured segment, Kotak Mahindra Bank witnessed strong growth in its loan portfolio. Total advances rose by 17% year-on-year to Rs 4.2 lakh crore as of September 30. Secured loans, including home loans and business banking loans, exhibited steady growth, with home loans increasing by 18% and business banking advances up by 21%. Unsecured retail advances, which include personal loans and credit cards, stood at 11.3% of total advances, a slight decrease from the previous quarter.
The bank's management highlighted a slowdown in the rural segment, reflected in loans for commercial vehicles, tractors, and microfinance initiatives. Additionally, they observed some overleveraging among customers, particularly in credit cards and personal loans. The bank is actively addressing these concerns through its risk management processes and credit underwriting standards.
In terms of asset quality, the gross non-performing asset (GNPA) ratio decreased to 1.49% from 1.72% a year ago. However, the net NPA ratio increased to 0.43% from 0.37% due to the stress experienced in the unsecured loan category since the RBI embargo. The bank's management has emphasized its commitment to maintaining a strong capital position, with a capital adequacy ratio of 22.6% and a CET1 ratio of 21.5% as of September 30.
On a consolidated basis, the bank's net profit grew by 13% to Rs 5,044 crore, compared to Rs 4,461 crore in the same period last year. The bank's total assets under management as of September-end reached Rs 680,838 crore, representing a 37% year-on-year increase. Kotak Mahindra Bank remains focused on expanding its retail lending business, as evidenced by its recent acquisition of Standard Chartered Bank India's personal loan book, which has a total outstanding of around Rs 4,100 crore.
The bank's management emphasized the importance of prudent risk management and stated that they have conducted due diligence to ensure the acquisition of Standard Chartered Bank's personal loan book will contribute to growth without compromising their risk profile. Overall, Kotak Mahindra Bank's second-quarter results demonstrate its strong financial performance, driven by growth in key areas. The bank remains committed to its strategic objectives of expanding its customer base, enhancing its product offerings, and maintaining a strong capital position to support its future growth aspirations.
Source: Kotak Mahindra Bank reports 5% rise in standalone net profit