Brokerages have provided a mixed outlook on Kotak Mahindra Bank Ltd. following its fourth-quarter earnings report. While some analysts highlight the bank’s strong asset quality and stable net interest margins, others point to the challenges posed by higher provisions and modest loan growth.
Nuvama, Investec, and Citi have weighed in with their perspectives, offering insights into the bank’s performance and future prospects. Despite the varied opinions, there is a consensus on the bank’s resilience and potential for growth, albeit with some caution due to its current valuation and market conditions.
Kotak Mahindra Bank Ltd. reported a decline in its fourth-quarter standalone net profit due to higher provisions for its distressed microfinance institution loan book.
The lender’s net profit fell by 14% year-on-year to Rs 3,552 crore for the quarter ended March 31, 2025, missing Bloomberg’s estimate of Rs 3,606 crore. Provisions rose sharply to Rs 909 crore from Rs 264 crore a year ago.
However, net interest income increased by over 5% year-on-year to Rs 7,284 crore, with net interest margins improving to 4.97% from 4.93% in the previous quarter. The bank’s asset quality remained stable, with the gross non-performing assets ratio falling to 1.42% from 1.5%, and the net NPA ratio decreasing to 0.31% from 0.41%. The provision coverage ratio stood at 78%, and fresh slippages fell to Rs 1,488 crore from Rs 1,657 crore in the previous quarter.
Here’s what the brokerages said:
Nuvama
Nuvama noted that Kotak Mahindra Bank’s asset quality had improved, with slippages falling for the second consecutive quarter and the provision coverage ratio increasing from 73% to 78%.
However, loan growth of 14% year-on-year and 3% quarter-on-quarter was lower than expected. “Net customer assets rose 3% quarter-on-quarter and 14% year-on-year. Excluding the Standard Chartered acquisition, loans grew 13% year-on-year and 2% quarter-on-quarter. Consumer loans, including unsecured loans, jumped 17% year-on-year and 5% quarter-on-quarter,” Nuvama stated.
Despite the mixed results, Nuvama increased its earnings per share and target price, but downgraded the stock to ‘hold’ due to its rich valuation, setting a revised target price of Rs 2,350.
Investec
Investec highlighted Kotak Mahindra Bank’s strong asset quality and stable net interest margins. “We continue to expect Kotak Mahindra Bank to sustain higher growth, partly offsetting normalised net interest margins and credit costs,” the brokerage said.
“We cut our FY26 earnings per share lower by 4% as we factor in 100 basis points of repo rate cuts; Kotak Mahindra Bank still delivers best-in-class profit after tax compound annual growth rate of 14% over FY25-27 (return on assets at 2.0-2.1%),” Investec noted.
The brokerage maintained a ‘buy’ rating with a target price of Rs 2,535, valuing the core bank at 2.4 times the March 2027 estimated book value and subsidiaries at Rs 696 per share.
Citi
Citi observed that Kotak Mahindra Bank’s earnings were supported by tax credits and higher fees, but noted misses in growth, operating expenses, and provisioning levels. “Encouragingly, personal loan delinquencies have improved and credit card stress has stabilised (with expectation of decline in coming quarters). However, slippages in microfinance institutions continue to be elevated. Minimal delinquencies and stronger recoveries in secured retail aided gross non-performing assets decline,” Citi said.
“Deposits grew by 11% year-on-year and 5% quarter-on-quarter, driven by Current Account-Savings Account deposit growth of 5% year-on-year and 7% quarter-on-quarter.”
Current account deposits, too, experienced strong growth of 10% year-on-year and 11% quarter-on-quarter, with average CA deposits up 9% year-on-year. Consequently, the “CASA ratio improved by 60 basis points quarter-on-quarter to 43%,” it said.
The brokerage retained its ‘buy’ rating, factoring in net interest income pressure and revising earnings up by 2% for FY26 and FY27, with the target price maintained.
. Read more on Earnings by NDTV Profit.Despite the varied opinions, there is a consensus on the bank’s resilience and potential for growth, albeit with some caution due to its current valuation and market conditions. Read MoreQuarterly Earnings, Markets, Business, Notifications
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