Banks
Kotak Mahindra Bank's profit rises 29%, but a foreign-currency deposit drive cuts its margin to 4.31%
The Indian lender's quarterly standalone profit reached ₹4,212 crore as loans grew 25% and provisions fell, while its net interest margin narrowed by 22 basis points from the previous quarter.
HedgeWeekly News Desk ·
Kotak Mahindra Bank reported on Saturday that standalone net profit for the July-to-September quarter rose 29% from a year earlier to ₹4,212 crore, up from ₹3,253 crore. Loan growth was strong and bad-loan provisions fell. Consolidated profit, which includes the group's brokerage, insurance and asset management arms, rose 26% to ₹5,645 crore.
Funding was the weak point. Net interest income rose 16% to ₹8,459 crore, but the net interest margin fell to 4.31%, from 4.53% in the April-to-June quarter and 4.54% a year earlier. The bank blamed most of the drop on raising foreign currency non-resident (FCNR(B)) deposits, of which it gathered about ₹55,344 crore. Total deposits rose 23% to ₹6.51 trillion, but only 13% excluding FCNR(B) money. The share of low-cost current and savings deposits fell to 38.2% from 42.3%.
Credit quality improved. Provisions fell 15% to ₹803 crore, and annualised credit cost dropped to 0.35% from 0.79% a year earlier. The gross non-performing asset ratio eased to 1.04% from 1.39%, and the net ratio eased to 0.24% from 0.32%. Net advances rose 25% to ₹5.77 trillion. Excluding loans against FCNR(B) deposits and a portfolio bought from Kotak Mahindra Investments, the increase was 19%. Annualised return on assets was 1.92% and return on equity was 11.65%.
For investors in Indian private lenders, the margin is the number to watch. Kotak's 22-basis-point quarterly drop is larger than the 14-to-18-basis-point decline that JM Financial expected for ICICI Bank, Axis Bank and Kotak in its earnings preview. JM said banks have been raising FCNR(B) deposits since June, estimating ₹1.10 lakh crore at HDFC Bank and ₹1.02 lakh crore at Axis. It listed three things to watch: how fast the money is lent out, the yields it earns, and funding pressure once the inflows slow. The results came out on a Saturday, so Monday's trading in Mumbai will give the market's first reaction.