Kotak Bank Q3 Profit Up 10%, Capital Mkt Arms Aid - RBI Embargo Unclear

Mumbai, Jan 18 (PTI) Kotak Mahindra Bank on Saturday posted a 10 per cent growth in its consolidated net at Rs 4,701 crore, aided by performance of capital markets-linked arms.

On a standalone basis, the private sector lender's net profit for the October-December period rose by 10 per cent.

The bank's chief executive and managing director Ashok Vaswani said the bank has done a significant progress on the technology front to address concerns which led RBI to put business restrictions last April, but added that while they are in touch with the central bank regularly, there is no word nby when the embargo will be lifted.

The capital market arms Kotak Securities and Kotak Mahindra Capital delivered a 59 per cent growth in its profit at a combined Rs 542 crore.

The share of the flagship bank business in the overall profit has gone down to 72 per cent as a result of the same.

The total income increased to Rs 16,050 crore from Rs 14,096 crore in the year-ago period, while the expenses came at Rs 10,869 crore against Rs 9,530 crore.

The gross non-performing assets ratio inched up to 1.50 per cent from 1.49 per cent three months ago.

For the reporting quarter, its core net interest income rose 10 per cent to Rs 7,196 crore on the back of a 15 per cent growth in advances and the net interest margin compressing to 4.93 per cent from 5.22 per cent in the year-ago period.

The other income grew 14 per cent to Rs 2,623 crore pushed by a 10 per cent growth in fee income at Rs 2,362 crore.

On the RBI embargo, Vaswani said the cost of the embargo is within the Rs 450 crore annualised hit which it had expected after the restrictions were announced.

"We have done a lot of work, worked on risk resilience and cyber security. Worked on new apps abd new experiences. We are constantly in touch with RBI. Let us see when they lift the embargo. I don't have a particular date which I have been given," Vaswani told reporters.

On a specific question on whether chief technology officer Milind Nagnur's resignation is linked to the embargo, Vaswani said the key executive decided to move back to the US because his family is based there and added that the bank will not be impacted by the sudden exit.

Vaswani said there is some evidence of an economic slowdown and with the volatilities like the one in rupee seen in the last 6-8 weeks, the bank has to become more cautious in its approach.

Restrictions on not being able to onboard new credit card customers have been among the reasons why the share of the unsecured loans has dropped to over 10 per cent for the lender, and the management added that it has the appetite to grow this share, even as regulatory concerns on the riskiness continue.

Once the embargo ends, the bank will "certainly" look at how to grow the business, Vaswani said, adding that the addition of Standard Chartered Bank's Rs 3,000 crore personal loan portfolio expected to be completed this month will add to the overall book.

The bank has seen improvements in the quality of the personal loan book, while the troubles on credit cards book seem to have plateaued, Vaswani said, adding that among the unsecured exposure, only microfinance may witness some growth in asset quality issues going ahead.

He said there has been some deacceleration on the pace of growth of the delinquencies in microfinance, which accounts for around Rs 8,000 crore of the Rs 4 lakh crore balance sheet, but added that the troubles are not over.

The unsecured loan exposures were among the reasons for the fresh slippages coming at Rs 1,657 crore, as against Rs 1,177 crore in the year-ago period, but the bank management added that the same has improved from the preceding September quarter's Rs 1,875 crore courtesy an improvement in tractor book.

Deputy Managing Director Shanti Ekambaram said that the issues with microfinance are industry wide, starting with the challenges to the joint lending group-based model in many states

The gross non-performing assets ratio inched up to 1.50 per cent as against 1.49 per cent three months ago.

The overall provisions went up to Rs 794 crore, up from Rs 579 crore in Q3FY24 and Rs 660 crore in Q2FY25.

The overall capital adequacy was over 22 per cent, and the bank has no plans of raising any core capital, Vaswani said.

Among other subsidairies, auto loans-focused Kotak Mahindra Prime's net dipped 9 per cent to Rs 218 crore, Kotak Infrastructure Debt Fund saw its net climb up by 16 per cent to Rs 12 crore, BSS Microfinance reported a RS 50 crore loss on the ongoing challenges.