Kotak Mahindra Bank shares came under sharp selling pressure in early trade on Monday, plunging 4.67% to ₹2,073.70 after the private lender reported a larger-than-expected drop in its fourth-quarter profit.
The stock opened at ₹2,105.10, well below its previous close of ₹2,185.20, and touched an intraday low of ₹2,058.00 as investors reacted to the bank’s Q4 FY25 earnings miss.
Q4 Results Disappoint as Profit Falls 14%
Kotak Mahindra Bank’s standalone net profit for Q4 FY25 fell 14% year-on-year to ₹3,551.7 crore, missing analyst expectations. The decline was primarily attributed to a sharp rise in provisions for potential bad loans, which offset otherwise steady loan and deposit growth.
Net interest income (NII) rose 4.5% year-on-year to ₹7,283.6 crore, but this growth lagged behind leading peers in the sector. The bank’s net interest margin (NIM) for the quarter was 4.97%, down from 5.28% a year ago, reflecting ongoing margin pressures.
Margin Pressure and Provisions Weigh on Sentiment
The bank’s profitability was further impacted by a surge in total expenditure, which climbed 14.4% year-on-year to ₹11,240 crore. While total income grew 6.8% to ₹3,182.5 crore, the higher cost base and increased provisioning led to the profit decline.
Asset quality remained stable, with gross NPA at 1.42% and net NPA at 0.31%, and the provision coverage ratio stood strong at 78%. However, the majority of Kotak’s loan book is linked to external benchmarks, making its margins vulnerable in a declining interest rate environment.
What Should Investors Do?
- Short-term investors may remain cautious as the stock could see further volatility until there is greater clarity on margin recovery and expense management.
- Long-term investors may view the current weakness as an opportunity, given Kotak Mahindra Bank’s strong fundamentals, robust capital position, and consistent asset quality.
- The stock’s attractive valuation, with a price-to-earnings ratio of 18.53 and a price-to-book ratio of 2.8, may offer support if the bank demonstrates improvement in profitability in coming quarters.