Kotak Mahindra Bank falls short of quarterly profit expectations because of increased provisions.

Kotak Mahindra Bank Reports Lower-than-Expected Q2 Profit

MUMBAI, Oct 25 – Kotak Mahindra Bank, a prominent private lender in India, revealed on Saturday that its profit for the second quarter was less than anticipated, largely due to increased provisions for potential bad debts.

The bank, which is the third-largest private lender by market capitalization, reported a standalone net profit of 32.53 billion rupees ($370.1 million) for the quarter ending September 30, down from 33.44 billion rupees a year prior.

Analysts had projected a profit of 34.49 billion rupees according to data from LSEG.

Provisions made for bad loans and other losses surged by 43% to 9.47 billion rupees, impacting the overall profit.

Net interest income saw a 4% increase to 73.11 billion rupees, benefitting from a 14% rise in loan volumes. Corporate loans, which make up 20% of the total, experienced the fastest growth at 17%, while consumer loans, accounting for 47%, grew by 16%.

“We’re focused on gradually rebuilding our unsecured retail business,” said Ashok Vaswani, the CEO, during a media call.

Deposits increased by 15% in the quarter.

Financial institutions in India are noticing a slow recovery in credit demand after a few weak quarters. Many analysts expect lending to pick up momentum more significantly in the latter half of the fiscal year, partly due to recent tax cuts.

“Besides credit cards, we’re witnessing growth in personal loan payments and a steady improvement in our microfinance offerings,” noted Devan Geewala, the bank’s CFO.

Kotak Mahindra Bank’s net interest margin, an important profitability metric, declined to 4.54%, compared to 4.91% in the same period last year.

The Reserve Bank of India has lowered benchmark interest rates by a total of 100 basis points this year to encourage spending and investment. Typically, such cuts can hurt banks in the short term, as there is often a lag in adjusting deposit rates, which can affect margins negatively.

The bank has reported improvements in its asset quality, showing a total non-performing asset ratio of 1.39% as of the end of September. This is a decrease from 1.48% in the previous quarter and 1.49% from a year ago.