Kotak Mahindra Bank reported a 23 percent rise in third-quarter net profit on Monday, sending the shares more than 2 percent up.
Kotak Mahindra, India's fifth-biggest lender by market capitalisation, said net profit was Rs 12.91 billion ($181.20 million) for the three months to December 31, 2018. In the same quarter a year earlier the net profit was Rs 10.53 billion. The profit growth was at its fastest pace in six quarters.
Highlights:
- Third quarter revenue up 23 percent
- Savings deposits up 34 percent year-on-year to Rs 73,958 crore
- Interest income rises 25 percent
- Shares up more than 2 percent on Monday after the results
The positive results came amid the bank's ongoing conflict with the Reserve Bank of India (RBI) over the promoter stake. The lender's ledgers were helped by higher interest income as well as write-back of provisions. The Interest income stood at Rs 62.50 billion in the quarter, an increase of about 25 percent.
Even as bad loan provisions rose more than 50 percent to Rs 2.55 billion, Kotak Mahindra got a write-back to the tune of Rs 2.72 billion, Reuters reported.
On March 12, the Bombay high court will take up the bank's plea challenging RBI's order throwing out its proposal to cut promoter stake.
"In accordance with the RBI communication, provision for mark-to-market depreciation on AFS and HFT investments continue to be presented under Provisions & Contingencies. However, if above provision for mark-to-market depreciation were treated as part of other income, the adjusted income will be higher by Rs 271 crore," Kotak Mahindra Bank said in a BSE filing.
Improving asset quality
The results also showed asset quality improved at Kotak Mahindra Bank. The percentage of bad loans was 2.07 in the latest quarter, compared with 2.15 percent in the second quarter and 2.31 percent in the same quarter a year ago.
Kotak Mahindra Bank is entangled in a tussle with the RBI over the equity stake of promoter Uday Kotak.
On March 12, the Bombay high court will take up the bank's plea challenging RBI's order throwing out its proposal to cut promoter stake.
The bank was facing a December 31 deadline to cut promoter holding to 20 percent from the current 30 percent. Under the RBI's guidance, the bank should further cut Uday Kotak's stake to 15 percent by March 2020.
Uday Kotak had attempted to cut his holding by using preference shares rather than common equity in August. However, the RBI cut down the move saying the bank could not take the Perpetual Non Convertible Preference Shares (PNCPS) route to pare promoter holding.
The bank said earlier last month it was moving the high court as the RBI did not respond to its request to reconsider its decision on preference shares.
