Kotak Mahindra Bank delivered strong results for the fourth quarter that witnessed 27 percent increase in consolidated net profit. However, this fell short of analysts’ expectations. The company’s loan growth was robust while its net interest margin was an industry leading one. Its quality of assets also remained stable. Investors were expecting the company’s results to top the Street estimates as the stock price jumped 2.01 percent in the NSE and 1.83 percent in the BSE at the close on Monday. As the bottom line missed, there could be selling pressures on Tuesday.
Consolidated Net Profit
Kotak Mahindra Bank’s profit after tax on a consolidated base increased to Rs.17.89 billion for the fourth quarter from Rs.14.04 billion in the same period last year. Consolidated advances also jumped 23.3 percent to Rs.2.06 trillion from the previous year. On a standalone basis, its net profit grew 15 percent to Rs.11.24 billion from Rs.9.76 billion in the prior year period, Business Standard reported. This is lower than the Rs.12.21 billion expected by analysts polled by BloombergQuint. Its net interest margin was 4.35 percent, which is the biggest in the banking sector in India. Its rival HDFC Bank could earn NIM of 4.3 percent for the same period. Also, HDFC Bank delivered better than estimated results for the three month period January – March.
The company’s gross non-performing assets (NPAs) moderated to 1.95 percent for the fourth quarter from 2.01 percent in the third quarter and 2.25 percent in the previous year period. This was based on a consolidated basis of total advances that the company has made during the period of January – March. Its Net NPA also fell 8 basis points to 0.86 percent on a sequential basis while it fell 23 basis points from the year-ago period.
Kotak Mahindra has provided provisions of Rs.3.13 billion for the fourth quarter compared to Rs.2.99 billion last year and Rs.2.26 billion in the third quarter. As far as its consolidated capital adequacy ratio, it improved to 18.81 percent from 16.77 percent in the year-ago fourth quarter. The company’s consolidated net interest income climbed 17 percent to Rs.33.89 billion.
In respect of the standalone results, the bank’s average savings deposits jumped 58 percent whereas average current account deposits climbed 25 percent. Therefore, the total deposits in the ratio of current and savings accounts jumped to 50.8 percent from 44 percent in the year-ago period. The company’s board recommended an interim dividend of Re.0.7 a share.
Additionally, the bank disclosed that Uday Kotak’s designation would be re-designated as managing director and CEO. This is in line with governance practice. Incidentally, Uday was the corporate governance committee chairman that was constituted by Securities and Exchange Board of India (SEBI). The company submitted its report to the market regulator in October last year.
Another development was that its part-time chairman from 2006, Shankar Acharya, would retire in July this year. He has not sought any reappointment. In his position, the board has named Prakash Apte. He will be the part-time chairman though subject to approvals from the regulators.