Kotak Bank shares plunge on weak earnings

NEW DELHI/BENGALURU:Rising bad loans have taken a toll on profitability of lenders, with several banks including Bank of Baroda, Dena Bank, Oriental Bank of Commerce and Kotak Mahindra Bank reporting a drop in net profit for the quarter ended June 2015.

The Kotak Mahindra Bank stock fell in afternoon trade a day after the lender reported a 25.8 per cent fall in Q1 net profit at Rs 516.57 crore on account of higher provisioning for bad loans. The bank had reported a profit of Rs 696.70 Crores in the April-June quarter of the last fiscal.

Kotak Mahindra Bank said the significant rise in provisions and contingencies could be attributed to ING Vysya.

Provisions including for bad loans and employee retirement benefits jumped 22 times from a year earlier, dragging down Kotak Mahindra’s net profit to 1.89 billion rupees ($29.52 million) for the three months to June 30, from 4.29 billion rupees a year earlier.

Kotak Mahindra agreed in November to buy ING Vysya for around Rs 15,000 crore in an all-stock deal in what was the country’s biggest bank takeover.

The gross NPAs as a percentage of total advances rose to 2.04 per cent, from 1.56 per cent in the year-ago period.

The private bank’s provisions shot up to Rs 305.31 crore from Rs 13.99 crore in the year-ago period. The branch banking business is expected to be integrated by April next year.

Other income fell 6 per cent to Rs 967.23 crore from Rs 1,024.54 crore past year. The net NPAs also increased to 0.93 per cent from 0.81 per cent.

Net interest income grew 4 per cent to Rs 3,460 crore from Rs 3,328 crore. 78 crore in the first quarter of the year.