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Bloomberg
Kotak Mahindra Bank Ltd posted an increase in first-quarter profit buoyed by a jump in income from non-lending businesses, including fees for services, even as its bad loan ratio widened
because of a deadly second wave of Covid-19 infections during the period.
Net income at India’s fourth-largest private lender was 16.42 billion rupees ($220 million), a 32% jump from 12.4 billion rupees a year ago, the financier said in an exchange filing on Monday. That nearly matched an average estimate of 16.5 billion rupees by ten analysts in a Bloomberg survey.
Kotak Mahindra Bank, founded by billionaire Uday Kotak, has substantially slowed down lending in the wake of a shadow lending crisis three years ago that converged into the pandemic last year as it aimed to protect its asset quality. The bank was the slowest lender among the top private peers the previous year and was relatively less impacted than most of them on asset quality.
Kotak’s other income more than doubled to 15.8 billion rupees from a year ago, helped by a 50% surge in fee income to 11.7 billion rupees in the quarter, filings show. However, its net interest income, or core earnings, grew at a muted pace of 6%.
The lender’s shares extended gains rising nearly 1% after the earnings were announced, while the broader gauge of banking stocks was little changed at 2:08 pm in Mumbai. The bank has the highest price-to-book ratio among top lenders in India.
The Indian lender’s gross bad loans widened to 3.56% at the end of June, from 3.25% in the three months prior.
The spike in Covid-19 cases and ensuing lockdowns prompted the Reserve Bank of India to extend a one-time debt restructuring facility until September, allowing lenders to tweak repayment lengths on stressed loans without having to classify them as non-performing. The relaxation could mask the full extent of soured loans in the banking system, which the RBI forecasts to rise to 9.80% by March 2022, from 7.48% last quarter.
The lender’s gross bad loans widened to 3.56% at the end of June, from 3.25% in the three months prior. It set aside 9.35 billion rupees toward provisioning in the June quarter, compared with 11.8 billion rupees in the previous three months.