Kotak bank net drops on higher provisions

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Private sector lender Kotak Mahindra Bank reported a ₹1,267 crore net profit for the quarter ended March 31 compared with the ₹1,408 crore reported in the year-earlier period.

The lower profit is due to the ₹650-crore provision made for repayment deferment on COVID-19 pandemic. As result, the total provisions made during the quarter went up to ₹1,047.47 crore compared with the ₹171.26 crore a year ago.

Net interest income (NII) for Q4FY20 increased to ₹3,560 crore from the ₹3,036 crore in Q4FY19 while net interest margin (NIM) for the quarter stood at 4.72%.

Uday Kotak, managing director and chief executive officer,Kotak Mahindra Bank said the lending strategy will be markedly different in the COVID-19 era even as the bank had become cautious in the pre-COVID era.

“How do we decide in lending in this COVID-19 era? First is sector. We are very clear about the right sector which we will lend. Number two, specific businesses or companies in the sector. We are focused on what is the level of fixed operating cost of the company. Higher the fixed cost, the more difficult it is for the companies to sustain in COVID-19 era,” he said adding there will be consolidation due to the pandemic in various sectors, including in the financial sector.

The gross NPA ratio of the bank went up to 2.25% as on March 31, 2020 compared with the 2.14% a year ago but came down from 2.46% at the end of December.

Capital adequacy ratio

Capital adequacy ratio of the bank as per Basel III, as on March 31, 2020 was 17.9% and tier I ratio 17.3%.

Advances went up by 7% to ₹2,19,748 crore as on March 31 while average savings account deposits went up by 21% and current account deposits 17%.

“Focus is on a strong deposit franchise. Our Casa [current and savings account] deposit is 56% of total deposits,” Mr. Kotak said.

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