Kotak Bank’s Q4 performance bits expectations

Private sector lender Kotak Bank posted better-than-expected earnings for the January-March quarter.
The bank on Wednesday reported a 10% on year (YoY) drop in standalone net profit at Rs 1,267 crore against Rs 1,408 crore posted for the same quarter last year.
Net interest income (NII) for the quarter rose 17.25 per cent to Rs 3,560 crore from Rs 3,036 crore a year ago.
Gross non-performing assets (NPAs) stood at 2.25%, higher than December quarter’s 2.14% but lower than year-ago quarter’s 2.46%.

The bank made Covid-19-related general provisions of Rs 650 crore for the quarter, which was higher than the RBI requirement.
Meanwhile, Kotak Bank has picked arrangers including Bank of America Corp. and Morgan Stanley to work on a proposed $1 billion share sale.

The fundraising could happen as soon as next month.
Kotak Mahindra in April announced a plan to sell as many as 65 million new shares. The lender did not provide pricing details, though following the formula set out by regulators, the offering could be worth about $1 billion in total.

The share sale plan comes after a resolution in January of an unusual legal feud with the Reserve Bank of India over the pace at which Uday Kotak, Kotak Mahindra’s founder and chief executive officer, should reduce his stake in the lender. The two sides agreed that Kotak should lower his holding to 26% from 30% by August.
Indian regulators are making it easier for companies to issue equity during the pandemic. Last month, the Securities and Exchange Board of India announced it would temporarily ease certain restrictions on rights issues by listed entities, including on fast-track rights issuances.

The management has made it clear in the concall that headwinds post the corona virus look negative and a full normal recovery will take time. Hence we expect a challenging time for the bank over the next 2-3 quarters ahead anf excpect normaly only from FY22 onwards

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