Kotak Bank: Q2 profit jumps as provisions fall

Kotak Bank: Q2 profit jumps as provisions fall

Shares of Kotak Mahindra Bank (KMB) surged more than 9% in the early trade on October 27, a day after the private lender reported profit at Rs 2,184.5 crore in the September quarter, a year-on-year growth 26.7%, aided by lower provisions.
Rise in pre-provision operating profit, NII and other income also boosted profitability.
Net interest income (NII), the difference between interest earned and interest expended, increased 16.8% to Rs 3,913.2 crore in the July-September quarter 2020 compared to the corresponding period previous fiscal.
Loan book declined 4% year-on-year to Rs 2.04 lakh crore and net interest margin contracted to 4.52% from 4.61% YoY, while deposits at Rs 2.61 lakh crore grew by 12.2% YoY.
Provisions and contingencies fell 9.6% to Rs 368.59 crore compared to year-ago period, while the sequential fall was 61.7%. Provisions included general provision for COVID-19 deferment cases (Rs 13 crore in Q2FY21 against Rs 616 crore in Q1FY21) and provision towards advances as well as others (Rs 332.72 crore against Rs 352.88 crore QoQ).
COVID-19 related provisions as at September 2020 stood at Rs 1,279 crore (0.62% of net advances). Non-specific provisions towards advances (including standard and COVID provisions) is at 177% of the net NPA.
On the asset quality front, gross non-performing assets as a percentage of gross advances fell 15 bps quarter-on-quarter to 2.55% in the quarter ended September 2020, and net NPA was down 23 bps QoQ to 0.64%, partly due to Supreme Court’s interim order which directed on September 3 that accounts which were not declared as NPA till August 31, 2020 shall not be declared as NPA till further orders.

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