Mumbai: Kotak Mahindra Bank Ltd. posted an almost 10% decline in quarterly profit as it stepped up provisions for potential bad loans stemming from the coronavirus pandemic.
Net income fell to 12.7 billion rupees ($170 million) in the three months ended March 31, India’s fourth-largest private lender said Wednesday. It set aside 6.5 billion rupees for Covid-19, bringing total provisions to 10.5 billion rupees, up from 1.7 billion rupees a year ago.
Indian banks are bracing for a surge in bad debts as an economic lockdown triggers mass unemployment and leaves many companies facing bankruptcy. Bank shares rose Wednesday, a day after Prime Minister Narendra Modi said his government will spend 20 trillion rupees to help the economy weather the fallout.
Kotak Mahindra climbed as much as 5.5% and was 2.1% higher in Mumbai afternoon trading, even as profit missed the 15 billion rupee average analyst estimate.
“The extent to which Covid-19 will impact the bank’s operations and financial results is dependent on the future developments, which is highly uncertain,” it said in a filing.
Gross bad loans fell to 2.25% of total advances from 2.5% the previous quarter. Newly soured debts totaled 4.9 billion rupees, down from 10.6 billion rupees three months earlier.
The bank said borrowers representing about 26% of its loan book tapped a repayment moratorium that the banking regulator has allowed during the crisis. The facility allows companies and individuals to hold off monthly repayments until the end of June.
Founded by Uday Kotak, Asia’s richest banker, the lender’s capital adequacy ratio was at 17.9% compared with 18.2% at the end of December, well above the minimum requirement of 10.875%. –Bloomberg
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