Kotak Mahindra Bank Q1 results: Profit slips 7% YoY; retail CV stress, high provisions weigh on earnings

Kotak Mahindra Bank reported a consolidated net profit of Rs 4,472 crore for the June quarter, marking a significant drop from Rs 7,448 crore in the same period last year. The previous year’s figure, however, included a one-time gain of over Rs 3,000 crore from the sale of a stake in its general insurance business, as per news agency PTI.On a standalone basis, the bank’s net profit declined 7 per cent year-on-year to Rs 3,282 crore. The bank attributed the dip to a combination of falling core income—impacted by Reserve Bank of India (RBI) rate cuts—slower fee income growth, and elevated provisions. Net interest income (NII) rose 6 per cent to Rs 7,259 crore, supported by 14 per cent loan book growth, but this was offset by a contraction in the net interest margin (NIM), which slipped 37 basis points to 4.65 per cent.According to chief financial officer Devang Gheewala, the bank’s income is highly sensitive to rate cuts, with over 60 per cent of its assets linked to the repo rate. He explained that while policy rate reductions affect yields immediately, deposit rates take longer to adjust, pressuring margins.Other income grew modestly by 5 per cent to Rs 3,080 crore. Gheewala noted that income will likely pick up once regulatory restrictions are lifted, allowing expansion in digital savings accounts and credit card issuance, as per PTI.Provisions more than doubled to Rs 1,200 crore. A significant portion of this was allocated for stress in the microfinance (MFI) segment and the retail commercial vehicle (CV) portfolio. “The provisions for MFI business have peaked,” said MD and CEO Ashok Vaswani, as per PTI. He added that disbursements in this segment have resumed cautiously and are expected to accelerate in the latter half of the year.Fresh slippages rose to Rs 1,812 crore, up from Rs 1,358 crore a year earlier, pushing the gross non-performing assets (NPA) ratio up to 1.48 per cent from 1.39 per cent. Gheewala said that nearly 35 per cent of the new slippages originated from the retail CV portfolio.As per PTI, deputy managing director Shanti Ekambaram explained that the smaller CV operators, those with fleets under 10 vehicles, are struggling due to weak demand in goods transport, pricing pressures, and delayed payments from government contracts. However, she added that other retail loan segments, including home and personal loans, are performing well.On the housing front, Ekambaram described the lending market as not only competitive but “irrational” in pricing. Despite this, the bank is aggressively pursuing the segment due to the long-term value and customer retention it offers.Kotak’s capital adequacy ratio remains strong at 23 per cent, with a core capital buffer exceeding 21 per cent. Vaswani said the bank aims to grow its book at 1.5 to 2 times the nominal GDP growth of India.Subsidiaries contributed more than one-third of the group’s profits. Kotak Securities reported a profit of Rs 465 crore, up from Rs 400 crore last year. The asset management and life insurance arms more than doubled their net profits to Rs 326 crore and Rs 327 crore, respectively.