Kotak Mahindra Bank exceeds forecasts with 26% increase in Q4 profits

Kotak Mahindra Bank, one of India’s leading private sector lenders, has reported a better-than-expected net profit increase of 26% for the January-March quarter.

The bank’s standalone net profit, excluding subsidiaries, rose to 34.96 billion rupees ($427.8 million) in the fourth quarter of the fiscal year, beating analysts’ forecast of 29.13 billion rupees. The bank attributed the increase to higher net interest income and strong loan growth. Net interest income, the difference between interest earned and interest expended, increased 35% to 61.03 billion rupees from 45.21 billion rupees a year ago. Net interest margin grew to 5.75% for the reporting quarter from 4.78% last year.

The bank’s loans increased by nearly 18% year-on-year, while deposits rose by 16.4%, largely led by term deposits. The bank’s asset quality also improved, with the ratio of gross non-performing assets (NPA) at 1.78% at the end of March, down from 1.90% at the end of December, while the net NPA ratio was 0.37%, compared with 0.43%. The bank’s board has also recommended a dividend of 1.50 rupees per share.

However, KVS Manian, president for corporate, institutional and investment banking, told reporters that demand for corporate credit was slow and corporate loans faced pricing pressure. Indian banks have continued to report double-digit credit growth in recent months despite interest rate hikes worth 250 basis points by the Reserve Bank of India (RBI) since last May, according to RBI data. Lenders have shored up their deposit base amid tightened liquidity conditions, although deposit growth has trailed credit growth for most banks.

Despite these challenges, large private banks such as HDFC Bank and ICICI Bank have also reported double-digit profit growth for the Jan-March quarter thanks to strong credit growth. Kotak Mahindra Bank’s success in achieving a better-than-expected net profit increase can be attributed to the bank’s continued focus on customer needs and innovative strategies to drive growth. As of March 31, the bank has a national footprint of 1,780 branches.

Last week, the bank’s shareholders appointed Uday Kotak as a non-executive, non-independent director. Kotak’s term as managing director and chief executive officer ends in December. The appointment is in accordance with the law and in the best interest of stakeholders, according to chief financial officer Jaimin Bhatt.

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