Private lender Kotak Mahindra Bank Ltd on Monday reported an 8.5% drop in net profit in the June quarter to Rs 1,244 crore, on the back of higher provisions and a drop in other income.
The bank’s provisions in the June quarter more than trebled from a year ago to Rs 962 crore, as it made additional covid-19 related general provisions of Rs 616 crore, taking its total pandemic provisions to Rs 1,266 crore as on 30 June. At the same time, its non-interest income declined 41% year on year to Rs 774 crore. The bank has 9.65% of its loan book under moratorium as on 30 June, down from 26% earlier //on 31 March?//.
“The availment of the moratorium has been significantly higher on the retail side compared to that on the corporate side. Within, what we call the wholesale book, there is more availment in the small and medium enterprises (SME) segment,” said Jaimin Bhatt, president & group chief financial officer, Kotak Mahindra Bank. Bhatt said among large corporates, the moratorium numbers are extremely small.
The bank’s net interest income (NII), or the difference between interest earned and expended, increased 17.8% y-o-y to Rs 3,724 crore. Its net interest margin (NIM), a key measure of profitability, stood at 4.4%, down 32 basis points (bps) from the sequential quarter. Gross non-performing assets (NPAs), as a percentage of total advances, stood at 2.7% in the June quarter, up 45 bps sequentially.
According to Dipak Gupta, joint managing director, Kotak Mahindra Bank, there is a set of borrowers who still need some relief from lenders to get a foothold.
“Whether it is in the form of moratorium or recast, some set of customers do require more flexibility and I do not think there is a problem in giving that flexibility,” Gupta told reporters on Monday.
Gupta said there is genuine stress out there and people will take time to come back to normal and therefore, one should not underestimate the pain.
“Some amount of alleviation of the pain has happened but I think the economy has to first start coming back to normal. The point about auto debit bounces is right, because people are having difficulties and they will take time to pay back,” he said.
According to a report in The Financial Express on 18 July, ‘bounce rate’ or failure rate on auto-debit transactions on the National Automated Clearing House (NACH) platform shot up to 45% in June against the six-month range of 31-38%. These are typically equated monthly instalments (EMIs) deducted from bank accounts of borrowers.
“That does not mean it is bad account and it is just that what you expected to be normal recovery in the past will take a slightly longer time. How long that time will be depends on how quickly all of these things will normalise. We have to be patient and wait for things to normalise,” said Gupta.
Meanwhile, the bank has been extremely cautious in growing its loan book during the pandemic, so much so that its total advances shrank 1.9% y-o-y to Rs 2.03 trillion in June 2020.
“There is no stoppage of lending; lending continues. It is just that incremental book growth is restricted and at this point of time, we don’t want to take significant concentration risk. This cautiousness will continue probably till one sees at least signs of the pandemic peaking. Once peaking is there, then there is more surety of the aftermath. Until then, we will just be cautious,” said Gupta.
