Friday, 21 July 2017

Kotak Mahindra Bank’s loan Growth takes the Sting out of Profit Miss

A look at Kotak Mahindra Bank’s rising loan growth should be enough for investors to forgive the lender for missing Street estimates of net profit for the quarter ended June.
Kotak Mahindra Bank posted a net profit of Rs912.73 crore, a 23% growth from a year-ago period.

Six analysts polled by Bloomberg forecast a net profit of Rs963.40 crore. The miss caused the stock to close 1.44% down for the day. The private lender’s net interest income, or the core income a bank earns, grew at a sedate pace of 17% to Rs2,246 crore.

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But the growth in its loan book was 18%, higher for a second consecutive quarter. This comes on the back of a strong growth of 21% in the corporate loan book, unlike most peer banks running after retail business. Not that the lender’s retail loan book growth is to be scoffed at.

At 20%, Kotak Mahindra Bank’s retail loans that consist of home loans, loan against property, loans to small businesses and other unsecured credit card and personal lending, too matched the speed of corporate disbursals.

The management’s comments on the outlook for loan growth and asset quality for the financial year are reassuring as well.
With its loan book expansion inching back to early 2016-17 levels, coupled with an enviable asset quality, picking out sore spots would be like splitting hairs for investors.

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