Kotak Mahindra Bank on Thursday reported a 55.84% fall in its first quarter net profits at Rs 189.78 crore on a standalone basis owing to higher provisioning post-merger with ING Vysya Bank (IVBL).
The bank reported a net profit of Rs 429.80 crore in the same period last year while it posted a net profit of Rs 527.14 crore in the fourth quarter of fiscal year 2015. The results for the first quarter are for the merged entity and hence not comparable with previous periods.
Kotak Bank attributed the fall in profits to retiral benefits of employees of erstwhile IVBL amounting to Rs 339 crore, provisions and contingencies worth Rs 305 crore, integration cost of Rs 63 crore including stamp duty and payment of additional interest on savings accounts of erstwhile IVBL amounting to Rs 30 crore.
A significant portion of the Rs 305 crore provisioning came from the erstwhile IVBL, the bank said.“We are beginning to see progress on the integration. We have already integrated the treasury and the wholesale bank. We expect to complete the entire integration process by around April 2016 and as we go into the future we will see a steady improvement in the synergy benefits growing out of the merger,” said Uday Kotak, executive vice-chairman and managing director at Kotak Mahindra Bank.
Net interest income (NII)—the difference between interest earned and interest expended—surged by 59.47% on a year-on-year basis to Rs 1598.19 crore in the first quarter while other income surged by 48.20% to Rs 592.43 crore compared to a year ago. The total income saw a rise of 70.65% to Rs 4,583.86 crore.
Net interest margins stood at 4.18% for the first quarter. The bank saw a fall in its operating profit by 10.30% to Rs 596.97 crore compared to a year ago. Asset quality dipped in the first quarter with the gross non-performing assets (GNPA) as a percentage of gross advances rising by 43 bps to 2.31% on a y-o-y basis.
Net non-performing assets as a percentage of net advances also rose by a marginal six bps to 1.04% compared to a year ago. On a sequential basis, GNPAs rose by 46 bps while NNPAs rose by 12 bps.“About 6% of erstwhile ING Vysya Bank book is what we have identified as stressed and on a combined basis, it is about 2.5% of the combined book,” Kotak added.