Kotak Mahindra Bank CEO addresses regulatory challenges after Q4 profit rises

Committed to rebound: Kotak Mahindra Bank's Chief Executive Officer, Ashok Vaswani, addressed the impact of the recent regulatory directive from the Reserve Bank of India (RBI) on the bank's operations and reputation. Despite expecting minimal financial repercussions, Vaswani acknowledged the adverse effects on both the bank's franchise and standing within the market.

Speaking at a media briefing in Mumbai, Vaswani underlined the commitment to rebounding vigorously from the setback, with a primary focus on addressing the IT-related deficiencies cited by the RBI. 

Vaswani pledged to intensify efforts, allocate additional resources, and augment investments in rectifying these issues, disclosing that the bank presently allocates 10 per cent of its total expenditure to IT.

Efforts are underway to collaborate with the RBI in appointing an external auditor to assess and enhance the bank's IT systems, a process anticipated to conclude expeditiously, according to Vaswani.

Following the regulatory intervention and the resignation of joint managing director KVS Manian, analysts expressed apprehensions regarding the bank's digital-centric business model and its potential medium-term growth implications. This concern is reflected in a 16 per cent decline in Kotak's share price over the past six trading sessions.

The regulatory measures and executive resignations follow the earlier departure of billionaire Uday Kotak, who stepped down as the bank's managing director and CEO last September, citing personal reasons before the conclusion of his term.

In financial news, Kotak Mahindra Bank reported a robust 26 per cent surge in fourth-quarter net profit, surpassing analysts' forecasts, buoyed by heightened core lending income and robust loan expansion. Standalone net profit, excluding subsidiaries, climbed to 41.33 billion rupees ($495.71 million) in the January-March quarter, compared to 34.96 billion rupees during the same period last year.

Net interest income surged 21 per cent year-on-year to reach 260 billion rupees, while the net interest margin (NIM) contracted to 5.28 per cent in the fourth quarter, though it outperformed the preceding quarter.

The gross non-performing assets (NPA) ratio improved to 1.39 per cent by the end of March, down from 1.73 per cent in December, indicating a healthier asset quality for the bank.

(With Reuters inputs)