KMB Q3 PAT up 16 pc, warns of likely margin pressure in Q4

MUMBAI: Private sector lender Kotak Mahindra Bank (KMB) today said that it has posted a 16 per cent rise in its net profit at Rs 384-crore for the December quarter but cautioned margins could come under pressure in the last quarter in case of rate hikes.

The bank's consolidated net profit for the corresponding period last year was Rs 331 crore.

On a stand-alone basis, the flagship banking vertical's net profit was up 32 per cent to Rs 188 crore vis-a-vis year-ago, with a 17 per cent increase in net interest income at Rs 571 crore.

The Mumbai-headquartered company's overall net interest margin (NIM) was down to 5.4 per cent from 6.2 per cent in the year-ago period and 5.6 per cent sequentially.

KMB's Executive Director Deepak Gupta attributed the fall to rising cost of funds, both in borrowing money and paying interest on deposits. Going forward, Gupta said he expects "some impact" on NIMs as the banking system is unable to transmit the rate hikes to lending on an immediate basis.

"The deposit rates go up first after a hike in rates by RBI but the transmission to lending takes 30-60 days (which will impact NIMs)," Gupta said, adding the bank expects a 25 basis points tightening by the Reserve Bank in its January 25 policy announcement.

KMB's peer Axis Bank had also expressed caution about maintaining margins in the last quarter.

The bank's subsidiaries like Kotak Securities, Kotak Mahindra AMC, Kotak Investment Advisors, Kotak Mahindra Investments as also the international subsidiaries, posted a decline in profits during the quarter which ate into the overall profits.

Gupta said the fall was due to the shaky situation in equity markets and added that this was an industry-wide issue.

The bank's consolidated credit growth stood at 37 per cent while the bank's Chief Financial Officer, Jaimin Bhatt, said it is targeting a 30 per cent jump in credit and deposits for FY12.

As on December 31, 2010, KMB's total capital adequacy stood at a healthy 19.5 per cent of which Tier-I accounted for 17.6 per cent, while its net non-performing assets were down at 0.51 per cent.

The bank had a provision coverage of 72 per cent on NPAs while the share of the cheaper CASA (current and savings account) deposits remained flat at 28 per cent.

Going forward, the bank will work towards pushing up its CASA share. It has also decided to resume granting personal loans, Gupta said.