Kotak Mahindra Bank (KMB), which announced its fourth quarter (FY25) results on Saturday, recorded a drop in its standalone profit-after-tax (PAT) by 14% year-on-year to Rs 3,552 crore due to higher provisioning for bad loans, especially in the micro-finance segment. This was lower than Bloomberg estimates of Rs 3,606 crore. For the full financial year, the bank’s standalone PAT stood at Rs 16,450 crore, higher than the estimate of Rs 15,708 crore.
Explaining the higher slippages, CEO Ashok Vaswani said the microfinance (MFI) portfolio faced challenges, leading to elevated credit costs and weighing on FY25 results. He also noted that the exposure has been reduced to the segment is at 1.6% of net advances from 2.5% of total assets.
He expressed optimism that credit card issues should start to come down, adding that personal loans are absolutely fine. One key achievement of the bank was the lifting of Reserve Bank of India’s (RBI’s) 10-month technology embargo in February. “We worked closely with the RBI and internal teams to resolve the issues,” Vaswani said.
On the capital market side, Kotak benefited from strong market conditions, with its capital markets and asset management businesses performing well.
KMB’s consolidated PAT in FY25 was Rs 22,126 crore aided by divestment of Kotak General Insurance to Zurich Insurance Group. Excluding the gain, the consolidated net profit was up 5% to Rs 19,113 crore in FY25.. Also, the fourth quarter and full year’s PAT includes gains in sudsidiaries and associates (excluding insurance) entities of Rs 411 crore due to alignment with the RBI’s directions on valuation of investment portfolio.
The bank’s board of directors announced a dividend issue along with its fourth quarter results. The lender will issue a dividend of Rs 2.5/share. “The board of directors have proposed a dividend of Rs 2.50 per share having a face value Rs 5 for the year ended March 31,” said the bank in an exchange notification, adding that the dividend will be paid after the approval from the shareholders at the upcoming annual general meeting.
Amid other major numbers, provisions and contingencies during the quarter rose more than three-fold to Rs 909 crore. However, despite the spike in provisioning, KMB’s asset quality improved marginally. Its gross non-performing asset (GNPA) ratio stood at 1.42% as of March 31, compared to 1.50% at the end of December 2024.
Loan growth remained robust, with advances rising 13% year-on-year, while deposits grew 15% during the quarter. The net interest income (NII) increased 5% to Rs 7,284 crore. However, the bank’s net interest margin (NIM) contracted to 4.97% from 5.28% a year ago. Sequentially, NIM showed a slight improvement from 4.93% in the December quarter.
The pressure on margins is attributed to a large portion of the bank’s loan book being linked to external (repo rate) benchmarks. Consequently, lending rates adjust quickly to RBI rate cuts in a falling interest rate regime, while deposit rate adjustments typically lag, squeezing margins temporarily.
The bank’s credit to deposit ratio stood at 85.5 per cent at the end of March 31, 2025, compared to 87.4 per cent at the end of December 2024 and 83.8% a year ago.