Kotak Bank flags stress in auto, MSME loans; net dip 7% as provisions soar 109%

The fourth largest private sector bank said its provisions for bad loan surged 109% to Rs 1,208 crore pulling down its net by 7% to Rs 3,282 crore even though the key net interest income rose 6% to Rs 7,259 crore.

The 7% drop in net income come is after adjusting for the one-time gain from the sale of its general insurance business. Including the gain, the unadjusted net profit is significantly higher at Rs 6,250 crore, the Vaswani said, adding the dip in the net is attributable to a substantial increase in provisioning and contingencies, which rose 109% on-year to Rs 1,208 crore.

Total interest income rose 8.5% to Rs 13,836.5 crore of which the net interest income increased 6% to Rs 7,259 crore, while the net interest margin stood at a robust 4.65% one of the highest in the industry. However, the cost-to-income ratio remained high at 46.19, and the return on equity plunged to 10.94% from 13.91%.

The asset quality deteriorated further with gross non-performing assets rising to 1.48% from 1.39% but net NPAs stood stable at 0.34%. this impacted the bank’s credit cost which rose to 0.93% primarily due to MFI and retail CV stress.

On a consolidated basis, the bank reported a net profit of Rs 4,472 crore, a mere 1% increase from the previous year, excluding the one-time gain from the divestment of Kotak General Insurance.