Kotak Mahindra Bank reports 8.5% decline in profit in Q1: Asset Quality worsens

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Kotak Mahindra Bank on Monday 27th July 2020 reported that the Bank had a decline of 8% in its Net Profit at ₹1244 crores for the quarter ending on June 30th 2020. It was ₹1360 crores in the previous year. The bank also stated that the extent to which covid-19 pandemic will impact the Bank’s operations and financial results is dependent on the future developments, which are highly uncertain. 

 The Mumbai Headquartered Private Sector Bank has also witnessed a 41% drop in its other incomes at ₹773.5 crores as against ₹1317 crores in June 2019. Kotak Mahindra Bank offers financial services and Banking Products for retail and corporate customers in the areas of Investment Banking, personal finance, life insurance and wealth management. The total standalone Income too declined to ₹7685.40 crores in the April-June Quarter of 2020-21, over ₹7944.61 crores in the same period of 2019-20.  

The Non-Performing Assets of the Bank are on the Rise on all fronts on both sequential basis and annual basis, gross non-performing ratio widened to 2.7% from 2.19% a year ago and 2.25% a quarter ago. 

The Percentage of net NPA’s increased to 0.87% from 0.71% in March Quarter and 0.73% a year ago. The absolute value of gross NPA’s or Bad Loans amounted to ₹5619.33 crore higher than 4613.52 crore a year ago. 

The Bank has made an additional Covid-19 related General provision of Rs.616 crores in the Quarter 1 of the FY21. The total provisioning towards the advances is higher than the GNPA of the Bank. The covid related provisions as on June 30th Stand at Rs.1266 crore. The Provisions, and Contingencies spiked three times in June Quarter to ₹962 crores as against ₹317 crore in the same period a year ago.  The continuous slowdown in the economic activities of the country has affected fee income generation from sale of third-party products, lending business and usage of debit/credit cards or collection efficiency, etc. The slowdown may impact customer defaults and consequently increase provisions at the group level. There is a high level of Uncertainty and unpredictable situation regarding the time required for life and business to get normal. 

The current account and Savings Account ratio (CASA) as on June 30th stood at 56.7 percent compared to 50.7 percent as on June 30,2019. Average Savings Deposit grew by 34 percent to Rs.105673 crore for Q1FY21 Compared to Rs.78654 crore for Q1FY20. Average current account deposits grew by 10 percent to Rs 36066 crore for Q1FY21 compared to Rs 32679 crore for Q1FY20.

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