No plans to raise capital or list insurance arm: Uday Kotak

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No plans to raise capital or list insurance arm: Uday Kotak

Kotak Mahindra Bank on Thursday reported a 17.2% surge in the net profit in its fourth quarter, which accounted to Rs 491 crore as compared to Rs 419 crore in same quarter the previous year.

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Kotak Mahindra Bank on Thursday reported a 17.2% surge in the net profit in its fourth quarter, which accounted to Rs 491 crore as compared to Rs 419 crore in same quarter the previous year. The company said that it's NBFC and investment banking arm has witnessed a rebound in the fourth quarter. The bank held that the "fragmentation and margin pressure in the market has been reflected in Q4 results as well." (Results in detials: Kotak Mahindra Bank Q4 net jumps 17% at Rs 491 cr )

Commenting on the bank's strategy going forward, Uday Kotak, the bank's vice-chairman and managing director said that it is "unlikely to raise any further capital." The company said it has "no plans to list its insurance arm."

The company's AMC business for the year, Kotak said has been subdued. "The life insurance business too has weathered the storm of the transformation post the policy guidelines," he disclosed.

Kotak identifies that bank deposits and fixed income instruments - the core of banking business are getting a lot more returns. He said that the "Indian savers have moved away significantly from the equity market."

Below is a verbatim transcript of Uday Kotak's interaction with the media. Also watch the accompanying video.

Q: How have your overall AMC business and the banking business performed in the last quarter?

A: In the last quarter investment banking business has been good. The asset management company business for the year has been subdued. We are not seeing new money in equity funds. If the saver gets a 9.5% or 10% in the bank deposits and can get 9.5% or 10% in debt FMP, why one should be taking equity risk and especially, with the bias at this stage being rates moving up? It is the reality of the economy and the financial markets at this stage. Hence, the ability of a business model is to be able to adapt to the reality of the market place.

Q: Banks stand to benefit from the savings rate that has gone up. You have the additional source of funding, how is that going to benefit you all because your CASA is at 30% of the total deposits? What is the outlook and the strategy on CASA going forward?

A: It is an important aspect of this overall pool especially, in an environment where interest rates are rising. Our strategy is a steady increase in branch network which we will continue to do. We will reach a number of about 500 branches in 2013 in terms of our branch network.

We will continue to focus on the corporate and the commercial banking space. The commercial banking space is the mid-market space which we call as a commercial bank. We see a very significant current account growth and flow coming through that model as well.

Unlike most banks which are run as either retail bank or wholesale bank, we actually run our bank internally as three player segments. It is the wholesale bank, it is the commercial bank and it is a consumer bank.

We believe that each of them have a specific bias towards ca or sa. I mean the consumer bank focus is naturally going to be significantly on sa, while the commercial bank and the corporate bank focus is more on ca.

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Q: What are your target portfolios divided between these different, your consumer banking, your corporate portfolio? How are you now looking?

Roughly if you get our corporate to retail, wholesale to retail is about two-third.

Q: How much of the growth was there in the fee-income?

A: Consolidated level will be flat, because brokerage and asset management are in consolidate.

Q: In terms of your capital adequacy, it is about 19%, it is above most of the peers, what is your strategy for that going forward and do you want to stock to those levels?

A: Last year we had a fund-raising from Sumitomo Mitsui banking corporation in July, which we raised about Rs 1,366 crore of capital and that brought an additional capital for the year. So we are very adequately capitalized. There is no plan of obviously raising any further capital and we will obviously want to grow the balance sheet and expect the capital better as we go forward. Inorganic expansion plans are certainly on the radar. But, I will have to once again say wait.