Kotak Mahindra Q1 net vaults 125 per cent

Strong growth in fee-based income from businesses like fund management and broking has helped Kotak Mahindra Bank to report first quarter results, which have exceeded expectations. Even on the lending side, the bank has achieved growth rates, which are way above other mid-sized private sector banks.

For the quarter ended 30 June, 2006, consolidated net profits surged 124.73 per cent to Rs104.43 crore from Rs46.47 crore for the previous year quarter. Consolidated income increased 70.49 per cent to Rs776.58 crore from Rs455.51 crore.

Interest income increased substantially by 62.98 per cent to Rs397.61 crore from Rs243.96 crore for the prior year quarter. Interest expenses for the quarter went up by 75.22 per cent to Rs187.59 crore, indicating modest pressure on net interest margins.

Fee and treasury income grew even better at 79.14 per cent to Rs378.97 crore from Rs211.55 crore. The bank and its subsidiaries in insurance, fund management and broking businesses did exceedingly well during the quarter.

Insurance premium during the quarter jumped 131 per cent during the quarter to Rs121.39 crore from Rs56.96 crore. Claims and transfers to reserves in the insurance business was Rs62 crore for the quarter, giving a net fund surplus of Rs59.39 crore.

Fee income, including commissions and brokerage, increased 76 per cent to Rs247.76 crore from Rs140.78 crore. Other income for the quarter was Rs31.33 crore as compared to Rs13 crore while profit on sale of investments was Rs17.19 crore against a loss of Rs5.22 crore. The bank booked a loss of Rs38.69 crore on revaluation of its investments in the insurance business.

Operating profits for the quarter increased 111.2 per cent to Rs197.99 crore. Operating expenses were higher by 37.76 per cent while staff costs went up by 86.07 per cent.

Provisions for non-performing assets, standard provisions and contingencies increased substantially during the quarter to Rs227.75 crore from Rs71.04 crore for the previous quarter.

Kotak Mahindra Capital Company (KMCC) and Kotak Securities (KS) became wholly owned subsidiaries of the bank with effect from 31 May, 2006, on acquisition of 25.1 per cent each held by Goldman Sachs for Rs333 crore. Hence the consolidated results also include the performance of these companies from that date, besides 75 per cent of profits till that date.

The bank is also planning a restructuring of its subsidiaries. A proposal to de-merge the trading and primary dealership division of KMCC into the bank has been approved by the board. Trading & clearing operations and strategic investments of Kotak Mahindra Securities would be merged with KMCC.

Kotak Mahindra is also planning to infuse additional capital into Kotak Mahindra Securities, Kotak Mahindra (International), Kotak Mahindra (UK), Kotak Mahindra Inc and Global Investment Opportunities Fund to make these companies direct subsidiaries of the bank.