kotak-mahindra-bank_625x300_61395843090
Shares of Kotak Mahindra Bank fell over 4 per cent on Friday after the India’s fourth-biggest private sector lender by assets reported a 56 per cent fall in its net profit for the June quarter.

Provisions related to the merger of ING Vysya Bank rose sharply, dragging down Kotak Mahindra Bank’s net profit to Rs 189 crore for the three months to June 30, from Rs 429 crore a year earlier.

Kotak Mahindra agreed in November to buy ING Vysya for around Rs 15,000 crore in an all-stock deal in what was the country’s biggest bank takeover. The operations were combined effective April 1.

Kotak Mahindra Bank’s net profit was hurt by provisions of Rs 339 crore towards retiral benefits of employees of erstwhile ING Vysya Bank. It also reported “provisions and contingencies of Rs 305 crore of which a significant portion is from erstwhile ING Vysya Bank.”

Uday Kotak, executive vice chairman and managing director of Kotak Mahindra Bank said, “We have taken significant provisioning costs in the first quarter of the combined bank post-merger. Going forward, we are excited with the opportunities and synergies that this merger brings and are confident that it will lead us on a new trajectory of excellence and leadership.”

Kotak Mahindra Bank expects its credit costs to jump this fiscal year as it makes more provisions related to its purchase of smaller local ING Vysya Bank, it said on Thursday.

Gross bad loans as a percentage of total loans rose to 2.31 per cent in the June quarter compared with 1.85 per cent in the March quarter. Net NPA too inched higher to 1.04 per cent against 0.92 per cent in the March quarter.

Prashasta Seth, CEO of IIFL AMC, has a positive stance on the Kotak Mahindra Bank. The stock is likely to do well in the long term as more synergy benefits flow in and integration costs fall, he added.

At 10:24 a.m., shares of Kotak Mahindra Bank were down 3.7 per cent at Rs 690 as compared to a 0.60 per cent gain in Nifty. (With Agency Inputs)