Kotak Mahindra Bank improves asset quality in Q2; gross NPA falls, capital adequacy remains strong

Kotak Mahindra Bank’s total provisions for NPAs and contingencies stood at Rs 6,266 crore by the end of Q2 FY25.

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Kotak Mahindra Bank reported improvements in asset quality for the fiscal second quarter ended September 2024, with gross non-performing assets (GNPA) falling to 1.49 percent from 1.72 percent a year ago. However, the net non-performing assets (NNPA) rose slightly to 0.43 percent at the end of Q2 FY25, from 0.37 percent a year ago.

The private sector bank reported fresh slippages for the quarter at Rs 1,875 crore, up from Rs 1,314 crore in Q2 FY24 -- this shows a rise in new non-performing loans. However, Kotak Mahindra Bank upgraded Rs 246 crore of fresh slippages within the same quarter, showing a quick resolution of a portion of the newly classified loans.

Kotak Mahindra Bank’s total provisions for NPAs and contingencies stood at Rs 6,266 crore by the end of Q2 FY25, down from Rs 6,721 crore in the corresponding period last year, with a provision coverage ratio (PCR) of 71 percent, compared to 79 percent in Q2 FY24.

Also read | Kotak Mahindra Bank Q2 results: Net profit rises 5% to Rs 3,344 crore, misses market estimates

Additionally, Kotak Mahindra Bank's SMA-2 (Special Mention Account-2) loans stood at Rs 176 crore at the end of September 2024, down from Rs 232 crore in June 2024. These are accounts overdue by 61-90 days, and often show potentially problematic loans.

In terms of restructured advances, the bank reported a COVID-related restructured fund-based outstanding of Rs 115 crore, and MSME-related restructured outstanding of Rs 133 crore. These restructured loans remain a small percentage of Kotak Mahindra Bank's book, at 0.06 percent of the lender’s net, it said.

Kotak Mahindra Bank’s credit cost during the second quarter increased to 0.65 percent, up from 0.42 percent a year ago. However, on the other hand, the bank's capital adequacy remains robust. It maintained a consolidated capital adequacy ratio (CAR) of 22.6 percent and a Common Equity Tier 1 (CET1) ratio of 21.7 percent as of September 30, 2024. This could provide the bank a strong capital buffer to support future growth and absorb potential risks.

The book value per share also increased significantly to Rs 740 in September 2024, compared to Rs 605 in September 2023.