Kotak Mahindra Bank shares tumble 6%; here is why the Street is disappointed

Kotak Mahindra Bank on Saturday reported a consolidated net profit of ₹4,472 crore for the June quarter and flagged stress on the retail commercial vehicle portfolio due to adverse macroeconomic conditions.

The consolidated net profit in the year-ago period was ₹7,448 crore, but it had included gains of over ₹3,000 crore on its stake sale in the general insurance arm, while the net profit for the March quarter stood at ₹4,933 crore.

On a standalone basis, the private sector lender's net profit dropped 7% year-on-year (YoY) to ₹3,282 crore, which was attributed to reverses on the core income front due to rate cuts by the RBI, slower growth in fee income, and also higher provisions.

The core net interest income grew 6% to ₹7,259 crore on the back of a 14% loan growth but was restricted by a 0.37% narrowing in the net interest margin to 4.65%.

The bank's chief financial officer, Devang Gheewala, said over 60% of the assets are linked to the repo rate, which gets repriced with every policy rate cut, while the decrease in cost of funds is taking longer as the deposit base takes longer to reprice.

The overall provisions on advances more than doubled to ₹1,200 crore, and a major part of it was due to money set aside on reverses the bank sees in the microfinance portfolio, which has been bothering for some quarters now, and also retail commercial vehicles.

The bank's managing director and chief executive Ashok Vaswani said it has cautiously started disbursing MFI loans, and the pace of disbursements will go up in the second half of the fiscal, which will help it show growth in the book as well.

"The provisions for MFI business have peaked," the CEO added.

Fresh slippages increased to ₹1,812 crore from ₹1,358 crore seen in the year-ago period, while the gross non-performing assets (GNPAs) ratio increased to 1.48% from 1.39%.