MUMBAI: Swimming against the tide is possibly the toughest challenge even for champions, but that’s what Kotak Mahindra Bank did in the last few years when the entire banking system was swept away by the avalanche of bad loans. Purists may struggle to fit Kotak Mahindra into a category – full-service bank, investment bank, non-bank lender, financial super market – but investors have no such
doubts. Quite simply, it’s the bestperforming bank stock on the bourses. With Anand Mahindra and Uday Kotak recusing themselves in this category, Kotak Mahindra won with three votes against two. The evolution of Kotak Mahindra Bank has been interesting to say the least. Its services include stock broking, insurance, currency trading and structured financial products.
What started as a bill-discounting firm in the 1980s with loans from a few friends, Kotak Mahindra is now among the top five banks in the country with highest profitability and lowest bad loans.
Uday Kotak, the founder of the firm, built it brick-by-brick in a regulatory environment that looked at individual efforts to run a bank with suspicion when the system was dominated by the state.
“We are truly honoured to receive this award as a bank. I am delighted along with the 45,000 employees of the company.
Last year was a year of integration with ING Vysya, which had its challenges. It is still work in progress, but I am truly happy on behalf of all our employees,” Kotak told ET.
The latest feather in his cap was the acquisition of ING Vysya, the Dutch lender’s Indian unit, in 2014.
Last week ING sold less than half of what it got in Kotak in the stock swap merger for about $550 million, making returns that probably exceeded any of its other investments. Besides clocking rapid growth in its core banking operations, the bank has established its presence across many businesses. It owns a 15% stake in MCX. Kotak Mahindra Bank had largely been a retail lender, with more than 60% of its advances coming from the segment in 2009-10.
Even as the share of the retail portfolio fell to about 50% of the loan book in 2014-15, the bank continued to report net interest margins (NIM) of more than 4.5%, the best in the industry. On the liability side too, the bank maintained deposit growth rates that were higher than the industry average.
While the loan mix has changed since the buyout of ING Vysya Bank, with the retail portfolio now accounting for 41% of the loan book, the resultant synergies are likely to bring in steady blended margins. The combined entity, with a network of 1,333 branches and loan book of nearly Rs 1.2 lakh crore, is now better prepared to compete with large private players.
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