Kotak Mahindra Bank still on ‘alert’ as profit improves 27% over the last three months

• Kotak Mahindra Bank reported an yearly improvement in profit of 27% and income growth of 17% in the second quarter.
• The bank is on ‘alert’ as it recovers from the impact of COVID-19 on its balance sheets.
• The bank has not recognised any non-performing assets (NPA) since August 31, adhering to the Supreme Court’s order. If not for that, its gross non-performing assets (GNPA) would have been at 2.07% and net non-performing assets (NNPA) would have been at 0.74%.

Kotak Mahindra Bank (KMB) is still on ‘alert’ as it recovers from the COVID-19 impact. In the three months from July to September, its profit increased by 27%, and net interest income (NII) has grown by 17% compared to the same period last year.

The numbers have come in a day after a news report indicated that KMB is eyeing a merger with IndusInd Bank, even as spokespersons of both financial institutions have denied this.


Even after earnings, the bank’s shares continue to flat in the stock market, marginally in the red.



Impact of compound interest waiver for moratorium loans
The bank is yet to address the impact of compound interest waiver for loans under moratorium. At the end of the first quarter, KMB had 10% of its total portfolio opting for the moratorium, which is considerably lower than other banks — except HDFC Bank.

The bank has not recognised any non-performing assets (NPA) since August 31, adhering to the Supreme Court’s order. If not for that, its gross non-performing assets (GNPA) would have been at 2.07% and net non-performing assets (NNPA) would have been at 0.74%.

“As a matter of prudence, the bank has made additional provisions (including on interest accrued) of ₹92 crore on such advances,” it said its filing.

Kotak Mahindra Bank: Asset Quality
Source: Company filings. GNPA and NNPA as on 30 September 2020.

At the end of the second quarter, KMB’s COVID-related provisions stood at ₹ 1,279 crore, accounting for 0.62% of its net advances. Non-specific provisions towards advances — including standard and COVID provisions — is at 177% of the net non-performing assets (NNPA) of the bank.

The bank’s CASA ratio has also improved from 53.6% to 57.1% on a yearly basis.

According to the bank, high frequency indicators are positive. This includes GST collections, power, petroleum and other sectors. Increased government spending and the Monetary Policy Committee’s (MPC) accommodative stance were also commended.

Considering the slow down in retail loans, KMB is looking to open up select segments for credit growth — home loans and high quality corporates in particular. According to the bank, rural and semi-urban India shows promise. This is reflected by the recovery of India’s infrastructure sector, which surprised everyone, including one of India’s richest men — Kumar Mangalam Birla.

Updated: Correction made. Kotak Mahindra Bank's gross non-performing assets (GNPA) would have been at 2.07% not 5.07%

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