M C Govardhana Rangan

Mumbai: Kotak Mahindra Bank Ltd, the worst performer on the Bombay Stock Exchange bank index this year, said fourth-quarter profit rose 41% as higher lending boosted revenue.

Net profit climbed to Rs 240 crore in the three months ended March 31 from Rs 170 crore a year earlier, the Mumbai-based company said in a release. That included profit from its brokerage, investment banking and insurance units. Total income for the group rose 31% to Rs 1,863 crore.

The bank aims to open more retail branches and seek new depositors and borrowers to offset a drop in income from arranging share sales as the global credit squeeze deters companies from raising capital, vice chairman Uday Kotak said.

Kotak Mahindra last fiscal year benefited from corporate clients seeking funding to expand in an economy, Asia third biggest, that grew 8.7%.

“Equity market volumes have declined sharply in the last two to three months, and Kotak’s marketshare is under pressure as well,’’ Aditya Singhania, an analyst at Credit Suisse Group, said in a note to clients before Friday’s earnings announcement. He rates the stock as an “under-perform,’’ and cut the share-price target to Rs 708 from Rs 883.

The lender on Friday said clients recorded marked-to-market losses on derivatives of Rs 612 crore as of May 8 after wrong-way bets on currencies soured.

Derivatives are financial instruments used to hedge risk or for speculation.

Their value is based on currencies, stocks, bonds, loans and commodities, or linked to specific events such as changes in foreignexchange rates.

Marked to market refers to the bank’s writedowns in the value of such investments based on current prices.

“One should change tack,’’ Kotak told reporters in Mumbai on Friday. “It is back to the basics of the spreads business, that’s the key which you would see in the next 12 months.’’

Profit on a standalone basis climbed to Rs 69 crore in the quarter from Rs 37 crore a year earlier.

Also on Friday, the bank informed the Bombay Stock Exchange its board of directors, at a meeting held on Friday, had inter alia decided to recommended a 7.50% dividend.

Source : DNA