Kotak Bank Group Q2 net soars 24%, beats market estimate

Mumbai: Kotak Mahindra Bank (KMB) on Friday reported a better-than-expected 23.77 percent rise in the September quarter consolidated net profit at Rs 941.9 crore, even as the private lender said the integration of ING Vyasya Bank's operations with itself will be completed over the next six months.

The Uday Kotak-led bank posted a standalone profit of Rs 570 crore and core net interest income of Rs 1,679 crore in the second quarter ended September 30.

Both the standalone and consolidated numbers beat the Street expectations, leading the bank share to gain.

Joint Managing Director Dipak Gupta said the merger of operations of ING Vysya with KMB will take another six months, saying the treasury and wholesale businesses are already aligned while the tedious retail is yet to be done.

The bank, which became the fourth biggest in the private space following the Rs 15,000-crore all stock merger completed in March, has already borne Rs 129 crore in expenses with regard to the merger and Gupta maintained the overall cost will be Rs 200 crore.

Group Chief Financial Officer Jaimin Bhatt maintained that the overall credit cost will remain as per the earlier announced target of 50 bps.

The market lapped the Kotak counter following better- than-expected numbers, despite a negative sentiment all across and pushed the share price up by 3.8 percent to Rs 688.60 on the BSE, whose benchmark Sensex dipped 0.70 percent.

Commenting on the numbers, Ravi Shenoy of Motilal Oswal Securities said in Mumbai that the numbers are better than his estimates with standalone profit clipping at 27 percent, driven by halving of provisions.

"Consolidated profit growth is even stronger driven by AMC and securities business. On the core banking business there is no negative surprise on asset quality. However, we continue to have a neutral rating on the stock given rich valuations," he said.

The bank reported a sharp four-fold increase in provisions to Rs 196.66 crore in Q2 as against Rs 58.22 crore in the year-ago period, but Bhatt explained that a bulk of it, Rs 176 crore, was for standard assets.

The addition to gross NPAs was Rs 200 crore during the quarter, and the GNPA ratio moved up to 2.08 percent from the 1.59 percent in the year ago period and 2.04 percent in the preceding quarter.