Kotak Mahindra Bank posts disappointing results in Q3FY14

For Q3FY14 the bank posted profit of Rs 340 cr, which is lower by 6% on yearly basis and 4% on quarterly basis. Decline in other income and rise in provisions & contingencies have led to such a fall in the net profit of the bank. 

Other income, which formed around 12% of the total income, has dropped by 1.7% on yearly basis and stood at Rs 299.71 cr for Q3FY14. Fall in the treasury income of the bank by 15% (forms 16% of other income) on yearly basis led other income to post decline in numbers. Net interest income of the bank has increased by 11% on yearly basis and stood at Rs 912.31 cr for Q3FY14.

Provision and contingencies have increased by 65% on yearly basis and declined by 4% on quarterly basis and stood at Rs 69.4 cr for Q3FY14. Gross non-performing asset (NPA) and Net NPA have also increased in this quarter on both sequential and yearly basis. Gross NPA and net NPA stood at Rs 1076 cr (7% up on Q-o-Q and 14% up on Y-o-Y) and Rs 584 cr (20% up on Q-o-Q and 81% up on Y-o-Y) respectively. Even as percentage of gross advances, asset quality has deteriorated and gross NPA and net NPA has increased by 4 basis points and 14 basis points respectively on sequential basis and stood at 2.01% and 1.1% respectively. 

On consolidated basis net profit of the bank has increased by mere 2.4% on yearly basis and stood at Rs 591.25 cr. It was Kotak Mahindra Prime, subsidiary of bank that offers car finance, which helped it to post better numbers on consolidated basis. The asset quality, however, has worsened on consolidated basis too. Gross NPA and net NPA has increased by 5 basis points and 12 basis points respectively on sequential basis and stood at 2.01% and 1.1% respectively.

The shares of the bank are currently trading at 2.94 times of its book value and look fairly valued.