Kotak Mahindra Bank’s share price dropped 5.45% to a low of Rs 2,066 on the National Stock Exchange. Key brokerages have downgraded the stock after its high provisioning in Q4FY25. Here is a detailed analysis
Nomura on Kotak Mahindra Bank: Downgrades to Neutral
The international brokerage house, Nomura, has downgraded Kotak Mahindra Bank to ‘Neutral’ from ‘Buy’ rating as it reported a muted quarter. The lower net interest income in Q4FY25 and higher operating expenditure impacted pre-provision operating profit (PPOP). Nomura expects the bank to deliver 2-2.1% return on assets and 12-13% return on equity over FY26-28. However, the brokerage firm raised the target price slightly to Rs 2,200 per share from Rs 2,110. Loan growth at 13.5% year-on-year was driven by healthy sequential growth across secured loans segments, while credit cards and micro-finance declined by 5% quarter-on-quarter and 19% QoQ, respectively.
Nuvama on Kotak Mahindra: Downgrades to Hold
The brokerage house Nuvama Institutional Equities downgraded Kotak Bank to ‘Hold’ from ‘Buy’. The bank’s asset quality has improved, which another brokerage house, Nuvama, said. However, the slippage fell for a second quarter in a row, and the provision coverage ratio improved from 73% to 78%. However, the bank’s loan growth of 14% YoY and 3% QoQ (organic 13% YoY/2% QoQ) came lower than the expectation of 4% QoQ. “We believe KMB (Kotak Mahindra Bank) is better placed for growth and NIM (as it has cut fixed SA sharply and has a shorter tenor) than peers,” said Nuvama.
Motilal Oswal on Kotak Mahindra Bank: Retains Buy rating
The domestic brokerage house Motilal Oswal maintained its rating and target price on Kotak Mahindra Bank. According to the broker, the lender reported a mixed bag with NII being largely in line with its expectations. However, other income stood strong amid better fee income. The bank stepped up the provisioning run rate and raised PCR. The reversal of the ban on card issuance shall revive customer onboarding, which shall result in the protection of yields in the repo cut cycle. The brokerage house has a Buy call and a target price of Rs 2,500 per equity share.
Kotak Mahindra’s Q4 result
Its net profit declined 14% YoY to Rs 35,517 crore in Q4FY25 as against Rs 41,333 crore in Q4FY24. The bank’s net profit fell as it set out huge provisions for rising potential bad loans, which offset solid loan growth. However, the bank’s NII rose 5% to Rs 72,840 crore while the NIM shrank to 4.97% from 5.28% a year earlier, but was higher than 4.93% reported in the previous quarter.