Kotak Mahindra Bank Q3 profit rises 15% as provision writeback helps

Kotak Mahindra Bank has reported a 15% increase in standalone net profit for the third quarter, helped by a writeback of provisions it had made earlier for possible bad loans.

Profit after tax for the quarter ended Dec. 31 increased to Rs 2,131 crore from Rs 1,854 crore a year earlier. Profit was up 5% from the second quarter’s earnings.

Net Interest Income (NII) for the third quarter increased 12 to Rs 4,334 crore from Rs 3,876 crore a year earlier. Net Interest Margin (NIM) expanded to 4.62% from 4.36%.

Other key highlights

1) Operating profit falls to Rs 2,701 crore from Rs 2,908 crore a year earlier on higher expenditure driven by the bank’s push for growth.

2) Net customer addition in Q3 was 2.1 million against 0.8 million in the same quarter last fiscal year.

3) Advances increased 18% to Rs 252,935 crore as of Dec. 31, 2021 from Rs 214,085 crore as of Dec. 31, 2020.

4) CASA ratio as of Dec. 31, 2021 stood at 59.9% versus 58.9% as of Dec. 31, 2020.

5) Average current deposits grew to Rs 49,417 crore for nine months ended Dec 31 from Rs 37,533 crore a year earlier.

6) Average savings deposits were Rs 119,645 crore for nine months ended Dec 31 versus Rs 107,363 crore.

7) Consolidated profit after tax for Q3 rose 31% to Rs 3,403 crore from Rs 2,602 crore a year earlier

8) For Q3, net contribution of non-bank entities was 37% of the consolidated profit after tax.

9) Total provisions held as on Dec. 31, 2021 was at Rs 7,269 crore.

10) Capital adequacy ratio was 23.3% and Tier I ratio was 22.4%.

Asset quality, provision writeback

The bank said it held an aggregate COVID-19-related provision of Rs 1,279 crore as of September 30, 2021. Based on the improved outlook, the bank reversed provisions amounting to Rs 279 crore during the quarter and nine months ended December 31, 2021. This helped boost its bottom line during the third quarter.

However, on a prudent basis, the bank continues to hold provisions aggregating to Rs 1,000 crore as of December 31, 2021 against the potential impact of COVID-19 based on the circumstances at this point in time.

The bank’s asset quality also showed signs of improvement. Its gross non-performing assets fell to Rs 6,983 crore as of Dec. 31, 2021, from Rs 7,126 crore on a proforma basis a year earlier and from Rs 7,658 crore in September 2021.

The bank’s gross NPA ratio was 2.71% and net NPA ratio was 0.79%. This compares with 2.26% and 0.50%, respectively, a year earlier. However, the bank said its gross NPA and net NPA would have been 3.27% and 1.24%, respectively, a year earlier had the Supreme Court not issued an interim order directing that accounts that were not declared as NPA till August 31, 2020 should not be declared as NPA till further orders.