Mumbai, India – Kotak Mahindra Bank, one of India’s leading private sector lenders, reported a 14% year-on-year decline in standalone net profit for the fourth quarter of fiscal year 2024-25, totaling ₹3,552 crore. This downturn is primarily attributed to a significant increase in provisions and contingencies, which tripled to ₹909 crore during the quarter. (Reuters)
Financial Performance Highlights
- Net Interest Income (NII): The bank’s NII rose by 5% year-on-year to ₹7,284 crore, reflecting steady growth in its core lending business.
- Net Interest Margin (NIM): NIM stood at 4.97%, a slight decrease from the previous year’s figure, indicating pressure on profitability margins.
- Loan and Deposit Growth: Loans grew by 13% year-on-year, while deposits increased by 15%, showcasing the bank’s continued expansion in its lending and deposit base.
Asset Quality and Capital Position
- Gross Non-Performing Assets (GNPA): The GNPA ratio improved marginally to 1.42% from 1.50% in the previous quarter, indicating better asset quality.
- Capital Adequacy: The bank’s Capital Adequacy Ratio under Basel III norms stood at 22.8%, with a Common Equity Tier 1 (CET1) ratio of 21.7%, reflecting a strong capital position.
Operational Developments
In February 2025, the Reserve Bank of India lifted restrictions imposed in April 2024 that had prevented Kotak Mahindra Bank from onboarding new customers via online and mobile banking channels and from issuing new credit cards. These restrictions were initially placed due to inadequacies in the bank’s IT infrastructure. The bank addressed these issues by appointing Grant Thornton Bharat as an external auditor and enhancing its internal tech team with resources from Accenture, Infosys, Oracle, and Cisco.
Market Reaction and Outlook
Following the earnings report, Kotak Mahindra Bank’s shares fell by 5.5%, marking it as the biggest loser on both the Nifty 50 and Nifty Bank indices during the session. Analysts cited higher credit costs and underwhelming loan growth as key concerns.
Despite the recent challenges, leading brokerage firm Citi upgraded Kotak Mahindra Bank to a ‘Buy’ rating, citing strong loan growth momentum and improving delinquency trends. Citi set a target price of ₹2,070, indicating a potential upside of 15% from the current market price.
Kotak Mahindra Bank faces a complex landscape marked by increased provisions and operational challenges. However, its strong capital position and proactive measures to address IT infrastructure issues position it to navigate these headwinds. Investors and stakeholders will be closely monitoring the bank’s strategies to enhance profitability and sustain growth in the coming quarters.(Reuters)
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