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Kotak Mahindra Bank beats estimates in Q1, but shares fall 4%

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Shares in Kotak Mahindra Bank dropped sharply after the private lender reported a sharp deterioration in asset quality in the June quarter. Gross non-performing assets rose 1.5 per cent (as a percentage of advances) against 1.27 per cent in the March quarter, while net NPAs grew at 0.8 per cent against 0.55 per cent in the previous quarter.

Kotak Mahindra shares fell over 4 per cent to Rs 678.70 post earnings announced and the stock was the top loser on the 50-share Nifty benchmark. (Track stock)

Operational numbers beat estimates, with consolidated net profit rising 41.5 per cent to Rs 627 crore against Rs 443 crore in the corresponding quarter last fiscal. Net interest income, the difference between interest earned on advances and paid on deposits, grew 25 per cent year-on-year to Rs 1,374 crore.



Net interest margin, a key measure of profitability, grew at 4.8 per cent against 4.7 per cent in the March quarter.

Kajal Gandhi of ICICI Direct told NDTV that net profit and NII have beaten estimates on account of strong other income, but the biggest concern is rising NPA.

"NPAs have gone above Rs 900 crore in the June quarter increasing by over Rs 200 crore in this quarter," she added.

ICICI Securities has a "hold" call on the stock. Kotak Mahindra has little upsides as valuations are quite rich, Ms Gandhi said.



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