Kotak Bank's Q2 profit likely to fall on higher provisioning | Economic Times

Mumbai: Private lender Kotak Mahindra Bank is likely to report a decline in net profits for the quarter ended September, weighed down by higher provisioning to cushion the impact of the Covid-19 pandemic.Brokerage Sharekhan pointed out that the September quarter for the BFSI (banking, financial services, and insurance) sector is expected to be influenced by regulatory and environmental factors rather than business factors, and the focus will be on management commentary rather than earnings performance.It expects the bank to report a 15.9 per cent decline in net profit from a year ago while NII may rise 13.4 per cent.NII is the difference between the interest income a bank earns from its lending activities and the interest it pays to depositors.ICICI Securities expects Kotak Bank to report a 25 per cent decline in its net profit from a year ago, due to a spike in provisions, while it expects net interest income (NII) to rise by 10 per cent. The brokerage believes that the banks’ contingency buffer of 60bps, huge MTM gain on investment portfolio, cost agility and low cost deposit based will cushion earnings impact, even if the lender chooses to recognise stress upfront.“Behaviour of exposure to real estate, business banking and self-employed customers into restructuring will be key,” the brokerage said in a note.Edelweiss expects Kotak Bank to report a 39.9 per cent decline in core profit after tax, and sees pre-provision operating profit (PPoP) dropping by 15.6 per cent.“Growth momentum is likely to be soft and below trend (risk conscious stance will sustain, as was seen in prior quarters). Asset quality should be broadly stable while provisioning might increase to build in adequate buffers for current uncertainty,” the brokerage said in a note.“Performance of other subsidiaries will likely come under some pressure,” it added.Last week, top private lender HDFC Bank reported a 18.4 per cent year-on-year rise in standalone net profit at Rs 7,513.10 crore for the September quarter.Smaller rival YES Bank’s net profit rose sequentially to Rs 129 crore in the second quarter ended September this year from Rs 45 crore in the first quarter ended June. The bank had posted a loss of Rs 600 crore in Q2 of the previous financial year.