Kotak Mahindra Bank Shares Tumble 5.31% Post Q4 Results

Shares of Kotak Mahindra Bank Ltd. experienced a significant decline on Monday, falling over 5% following the release of the private lender's financial results for the March quarter. The dip positioned the stock as a key drag on both the Nifty 50 and the Nifty Bank indices during the trading session. At 12:00 PM, the share price was trading lower by 5.31% at ₹2,069 apiece on the NSE. This negative market reaction stemmed largely from the bank's fourth-quarter performance falling short of market expectations and prompting subsequent downgrades by multiple brokerage firms.

A Closer Look at Q4 Performance

Kotak Mahindra Bank reported a net profit of ₹3,551.74 crore for the January-March quarter. This represented a 14% decline compared to the ₹4,133.30 crore posted in the same period last year. The primary driver behind this drop in profit was a sharp increase in provisions for bad loans. The bank's provisions surged more than three times year-on-year, rising to ₹909 crore from ₹264 crore in the corresponding quarter last year.

While the bank saw a 5.4% growth in its net interest income (NII) compared to the same quarter last year, NII, along with pre-provision operating profit (PPOP) and net profit, missed consensus estimates in Q4. The NII was up just 1% sequentially and 8% year-on-year, missing estimates by 2.5%. The bank's Net Interest Margin (NIM) stood at 4.96% for FY25 and 4.97% for Q4 FY25.

Gross non-performing assets (NPAs) as a percentage of total advances came in at 1.42%, down from 1.50% in the previous quarter. Net NPAs also declined to 0.31% from 0.41% in the December quarter. The provision coverage ratio (PCR) climbed from 73% to 78%. Despite this positive trend in asset quality, other factors weighed on investor sentiment, including softer loan growth. Sources also highlighted that the bank's deposit growth was slower than that of peers like ICICI Bank and HDFC Bank. Average total deposits, however, did rise to ₹4,68,486 crore for Q4 FY25, a 15% increase annually compared to Q4 FY24.

For the full financial year 2024-25, the bank's net profit saw a 19% increase, rising to ₹16,450 crore from ₹13,782 crore in FY24. The bank's board also recommended a dividend of ₹2.5 per share.

Analyst Concerns

Following Kotak Mahindra Bank’s Q4 FY25 results, several analysts downgraded the stock due to concerns over margin pressures, slower deposit growth, and subdued core income performance. While target prices were marginally raised, ratings were revised downward in view of stretched valuations and a perceived margin-versus-growth trade-off. The slowdown in loan growth during the quarter also raised red flags, particularly after a strong rally in recent months.

Despite the cautious sentiment, some analysts maintained a positive long-term view, citing expectations of a rebound in growth driven by consumer and unsecured lending. The recent lifting of the RBI’s credit card ban was seen as a favourable development that could support customer acquisition efforts.

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