d
Kotak Mahindra Bank Ltd’s
capital markets business has done pretty well in the March quarter as
equity markets rallied, but a weakening economy continued to take a toll
on its lending business.
Net profit of the broking business doubled to Rs.44
crore although that increase is partly due to a low base. Indian equity
markets have been hovering at an all-time high and turnover,
particularly from retail investors, has increased, boosting broking
profits. Other fee-based businesses have done well, too. The life
insurance business continued to maintain a 12% year-on-year growth rate
in profit while the investments business profits also doubled to Rs.16 crore in the March quarter.
The financing business—Kotak Mahindra Bank (stand-alone) and Kotak Mahindra Prime Ltd—continued
to struggle because of low economic growth. While consolidated loan
growth at 8% over a year ago was better than the 6% pace seen in the
December quarter, it was still lower than industry growth.
The slowdown in credit growth, however, can be construed
as a prudential measure. It is mostly owing to a 30% decline in the
commercial vehicle and construction equipment loan book, a segment
particularly susceptible to bad loans. Excluding this, advances growth
was a decent 17%. Auto loans grew at 4%, while the corporate book saw a
pick-up in growth to 19% from 6% in the previous quarter.
The bank was able to boost its net interest income thanks
to 20 basis points year-on-year increase in net interest margins (NIMs)
to 4.9%. However, operating and net profits remained little changed
from a year ago because of an increase in operating expenses.
One basis point is one-hundredth of a percentage point.
The bank’s asset quality improved slightly. Gross bad
loans as a proportion of the loan book stood at 1.63%. Restructured
loans also fell to Rs.10 crore at the end of March compared with Rs.42 crore three months ago.
While asset quality and NIMs are positives, the bank has
to improve loan and earnings growth. The management has guided for a
15-20% loan growth in the current fiscal year, but fell short of a
similar target in 2013-14.
Kotak shares have lagged S&P BSE Bankex returns since
the start of 2014. Given that they trade at an expensive 4.4 times
estimated book value for 2014-15, earnings have to grow faster for the
bank to have a chance of outperforming the Bankex.
PRAVEEN SHARMA
PGDM 2nd
No comments:
Post a Comment