Kotak Mahindra Bank on Thursday reported a net profit of Rs 1,025 crore for Q1FY19, a 12% increase year-on-year. Speaking to reporters after the announcement of the results, Dipak Gupta, joint managing director of Kotak Mahindra Bank, said the bank had been facing concerns from loans towards small and medium enterprises (SMEs) and these were early signs of pain coming in the future. Excerpts:
What is the level of exposure to the SME business out of the total advances in the banks’ loan book? How is it performing?
The bank has been witnessing concerns from the SME segment and the provisions for the same are on the higher side. These seem to be early signs of pain for the future. I think we were carried away by the problems from the large and mid-corporates and forgot about the SMEs. On advances towards SMEs, we have consciously slowed down mainly because the trading business segment is now feeling the pain post demonetisation and the goods and service tax (GST). The total exposure from these accounts stand roughly at about Rs 18,000 crore out of the total advances of `1.76 lakh crore.
Your rival private sector banks are focusing on growth at about 50% and you are aiming at a 20% growth, replacing you as the fourth largest private sector bank; is there any piece missing, what is the rationale?
Well, it is not like that. If you consider the three pieces of the business: The corporate, the commercial and the consumer part, the consumer piece has been growing at 25% and will remain the same going forward. The commercial piece has two sub-parts, SMEs and commercial vehicles, construction equipment and tractors and the like. The latter part has been growing at around 30-40% for us too, except the SMEs that have been a bit of a pain for us. And we have consciously slowed down on that front. Lastly, the corporate bit is peaky. If there is one National Company Law Tribunal (NCLT) decision, one takeover of a fresh loan and suddenly you can add a very large part to your book loan. So yes, there you can expect a 50% growth but they are not necessarily indicative of opportunities in the market place in totality. But yes, from a sheer market share point of view, we are expecting a growth rate of 20% going forward.
Is this quarter’s profit the lowest profit growth for the bank?
Well, it really depends on how you look at it. For instance, if you discount the mark-to-market (MTM) piece, then the growth in the profit is 25% and that is like a normal growth.
What sort of loan and margins (net interest margins) growth do you expect going forward?
We had talked about our growth earlier in the year where we were aiming at a growth in the 20s range, and we will be on track for that target, going forward. The margins in the quarter are similar to the previous quarter and we expect it to be stable around the 4.1- 4.3% mark.