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Kotak Mahindra Bank posts higher profit, improves asset quality in Q3; stock jumps 7 percent

Net profit was up 39 percent and net interest income up 16 percent in the December quarter of FY17

Salil Panchal
Published: Jan 25, 2017 04:14:58 PM IST
Updated: Jan 25, 2017 04:59:32 PM IST

Kotak Mahindra Bank posts higher profit, improves asset quality in Q3; stock jumps 7 percent Image: Anindito Mukherjee / Reuters

Kotak Mahindra Bank, India’s fourth largest private lender by branch network, beat market analysts’ expectations as it reported a 39 percent rise in standalone net profit for the three months to December 2016, at Rs 880 crore from Rs 635 crore in the corresponding quarter a year earlier.

Net interest income, the difference between interest earned and interest expended, for the third quarter of FY17 rose 16 percent to Rs 2,050 crore.

After the earnings were announced, the stock surged 6.97 percent to close at Rs 794 on BSE, with sentiment buoyed by better-than-expected profit and an improvement in asset quality over the previous (July-September) quarter.

Gross non-performing assets (as a percentage of gross advances) improved to 2.42 percent, against 2.49 percent for the quarter ended September 2016. Net NPAs stood at 1.07 percent, compared with 1.2 percent for the July-September quarter.

In absolute terms, GNPAs were Rs 3,177.88 crore for the third quarter of FY17, against Rs 3,180.66 crore in the previous three months and net NPAs stood at Rs 1,379 crore, against Rs 1,516.76 crore.

So far, for the third quarter of FY17, earnings from Indian banks have been mixed, with some like IndusInd Bank, South Indian Bank and Canara Bank posting improved earnings, while others like Axis Bank have posted disappointing earnings, hit by weak asset quality and an increase in higher provisions and fresh slippages.

But with credit growth in the system still weak, most banks are likely to continue to see a pressure on their earnings, particularly on their margins, in the coming quarters.

As with some banks, demonetisation emerged as a positive, both in terms of deposit growth and debit and credit card transactions. Savings deposits grew by 45 percent to Rs 38,566 crore as on December 31, 2016 compared with around Rs 26,579 crore, on the same day a year earlier.

The bank’s active debit card customers saw a sharp 86 percent rise in December 2016 to the period prior to demonetisation. Transactions on all the digital banking channels saw growth in terms of both volumes and value. Monthly transactions for Kotak Mahindra Bank on the mobile platform have crossed Rs 4,800 crore in December 2016.

On an annual basis, payment gateway transactions have grown 94 percent and the transactions from mobile phones now constitute 45 percent of all transactions. Kotak Securities mobile transaction volumes touched a peak of Rs 8,300 crore in the quarter.

Kotak Mahindra Bank has a total network of 1,348 full-fledged branches and 2,051 ATMs across the country. The bank has expanded at a time when the Indian banking sector is still undergoing tough times, where credit growth is yet to pick up and non-performing asset levels for several banks are high.

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