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Kotak Mahindra Bank Q1FY17 net profit soars 290%

But stock dips as bank misses profit estimates, asset quality deteriorates

Salil Panchal
Published: Jul 21, 2016 03:43:23 PM IST
Updated: Jul 21, 2016 04:11:52 PM IST
Kotak Mahindra Bank Q1FY17 net profit soars 290%

Kotak Mahindra Bank, India’s fourth largest private lender by branch network, reported a near four-fold jump, or 290 percent, in standalone net profit for the three-months to June 30, 2016, at Rs 742 crore compared to Rs 190 crore in the corresponding quarter a year earlier, as net interest income rose.
But the profit rise was below analysts’ forecasts and the asset quality for the bank weakened marginally in the June quarter. Kotak Mahindra Bank was estimated to show a 300 percent jump in net profit for the June-ended quarter.
It had completed the merger with Bangalore-based ING Vysya Bank in April 2015, which it had acquired in an all-stock deal announced in November 2014, valuing the smaller bank at $2.4 billion.

After the earnings were announced Thursday, shares of Kotak Mahindra Bank closed down 2.79 percent to Rs 760.15 at the Bombay Stock Exchange.

Net interest income, the difference between interest earned and interest expended, for Q1FY2017 was around Rs 1,919 crore, up around 20 percent for the corresponding period a year earlier, the bank said.

As of June 2016, the combined entity has total deposits of Rs 1,40,028 crore and advances of Rs 1,20,765 crore. Kotak Mahindra Bank has a total network of 1,333 full-fledged branches and 2,034 ATMs across the country. 

The bank said it plans to reach 1,400 branches by December-end 2017.

Disclosing its digital expansion, Kotak Mahindra Bank said mobile transactions were at Rs 3,000 crore per month in June 2016.

But Kotak Mahindra Bank’s asset quality deteriorated, with gross non-performing assets (NPAs) as a percentage of advances rose to 2.5 percent on June 30, 2016, from 2.31 percent a year earlier and net NPAs were at 1.2 percent on June 30, against 1.04 percent for the same period last year.

All banks are in the race to clean up their balance sheets and reduce rising levels of NPAs and stressed assets. The Reserve Bank of India (RBI), which has carried out its asset quality review (AQR) has told these banks to clean their balance sheets off these bad assets by March 2017.

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