India's Kotak Mahindra Bank quarterly net profit jumps 31%

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A man walks past the Kotak Mahindra Bank branch in New Delhi

MUMBAI (Reuters) -India's Kotak Mahindra Bank reported a 31% increase in net profit on Saturday for the October-December quarter, aided by a strong top line and healthy loan growth.

The lender's net profit reached 27.92 billion rupees ($344.2 million), compared with 21.31 billion in the same period last year and with an average analyst expectation of 26.28 billion, according to Refinitiv IBES data.

Net interest income - the difference between interest earned and interest expended - rose 30.4% from a year ago to 56.53 billion rupees, while other income rose nearly 54%. The net interest margin (NIM) was at 5.47% compared with 4.62% last year.

The bank said it expects a further uptick in NIM in the short term, though this may taper off as borrowing costs also inch up.

"As we are seeing interest rates picking up, we will see some increase in NIM," said Jaimin Bhatt, group chief financial officer, on a conference call with reporters.

The lender’s advances grew by more than 23%, while deposits rose by nearly 13% year-on-year. The bank's current account and savings account (CASA) ratio was at 53.3% as on Dec. 31.

Indian banks are looking to fund the current pace of credit growth by increasing their deposit bases. Loans by Indian banks rose nearly 15% in the fortnight ending Dec. 30 compared with a year ago, while deposits rose only 9.2%, according to the latest data from the Reserve Bank of India.

Kotak Mahindra Bank’s gross bad loans as a percentage of total loans – a key measure of asset quality – was at 1.90% at the end of December, versus 2.08% at the end of September. Its net non-performing assets ratio stood at 0.43%, against 0.55%.

The bank's provision coverage ratio was at 77.6% at the end of December. It held Covid-related provisions worth 4 billion rupees.

(Reporting by Siddhi Nayak and Nupur Anand; Editing by Raju Gopalakrishnan and David Holmes)