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Kotak Mahindra Bank Q1 FY18 net profit down 6.5% sequentially, misses forecast

Bank says ING Vysya acquisition exposed it to four accounts lined up for bankruptcy proceedings

Salil Panchal
Published: Jul 20, 2017 06:36:16 PM IST
Updated: Jul 20, 2017 06:53:49 PM IST

Kotak Mahindra Bank Q1 FY18 net profit down 6.5% sequentially, misses forecastImage: Pradeep Kaur/ Getty Images

Kotak Mahindra Bank, India’s fourth largest private lender by branch network, missed market analysts’ expectations reporting a 6.52 percent drop in profits to Rs 912.73 crore on a sequential basis, in the first quarter of the new financial year. The bank, in the January to March quarter, had reported a net profit of Rs 976.48 crore. On a year-on-year basis, however, the bank's standalone net profit was up 23 percent.

The bank also missed the analysts' forecast polled by CNBC TV18, which pegged profit higher at Rs 1,041 crore for the June-end quarter. After the earnings were announced, the stock closed down 1.44 percent at Rs 980.4 apiece on the BSE.

Net interest income, or the difference between interest earned and interest expended, rose by just 3.93 percent to Rs 2,246 crore in the three months to June 2017, compared to Rs 2,161 crore in the fourth quarter of FY17. From a year earlier, NII was up by 17.04 percent.

Asset quality for the bank was stable, but it has disclosed that it has–through its acquisition of ING Vysya Bank–inherited an exposure of Rs 236 crore through four of the 12 accounts identified by the Reserve Bank of India (RBI) in June this year, as being eligible for bankruptcy proceedings.

As on June 30, 2017, the gross non-performing assets or GNPAs (as a percentage of gross advances) was at 2.6 percent (2.59 percent in the sequential previous quarter) and net non-performing assets was at 1.2 percent (1.26 in the sequential previous quarter).

In absolute terms, GNPAs for the bank were Rs 3,726.62 crore in Q1 FY18 (Rs 3,578.61 crore in the previous quarter) and net NPAs stood at Rs 1,777.93 crore (Rs 1,718.07 crore in the previous quarter and Rs 1,467.11 crore a year ago).

“The numbers are strong, we see little cause for concern, its acquisition of ING Vysya has been smooth,” a banking analyst at a foreign brokerage said, on condition of anonymity. On the new disclosure relating to accounts lined up by the RBI for bankruptcy proceedings, he said ING Vysya had already identified these accounts earlier in “their bad bank”.

The retail-focused bank has been keen to expand through inorganic ways, even post the ING Vysya acquisition in 2015. Kotak Mahindra Bank has a network of 1,362 full-fledged branches and 2,173 ATMs across the country.