Kotak Mahindra Bank shares slip 4% after Q4 profit drops 14% YoY. Should you buy, sell or hold?

Kotak Mahindra Bank shares fell 3.6% to an intraday low of Rs 2,102.20 on BSE in early trade on Monday, after the private sector lender reported a 14% year-on-year (YoY) decline in standalone net profit for Q4FY25 at Rs 3,551.74 crore, compared to Rs 4,133.3 crore in the same quarter last year.

Net interest income (NII) rose 4.5% YoY to Rs 7,283.57 crore, but both net profit and NII figures missed ET Now poll estimates.

Meanwhile, the bank’s total income grew 6.8% year-on-year to Rs 3,182.46 crore and the total expenditure was up by 14.4% YoY to Rs 11,240.03 crore.

Kotak Mahindra Bank’s Net Interest Margin (NIM) was 4.96% for FY25 and 4.97% for Q4FY25. The average total deposits of the bank surged to Rs 4,68,486 crore for Q4FY25 compared to Rs 4,08,321 crore for Q4FY24, up by 15% YoY. Average total deposits for FY25 grew at 16% YoY.

On the asset quality front, the bank reported gross non-performing assets (GNPA) at 1.42% and net non-performing assets (NNPA) at 0.31%, compared to GNPA of 1.39% and NNPA of 0.34% as of March 31, 2024.

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Should you buy, sell, or hold Kotak Mahindra Bank's stock? Here’s what brokerages say:

Motilal Oswal

Motilal Oswal Financial Services has retained a ‘Buy’ rating on Kotak Mahindra Bank with a target price of Rs 2,500.

The brokerage said the bank’s pre-provision operating profit (PPOP) was in line with expectations, though higher prudential provisions led to a marginal earnings miss. Asset quality remained stable with sequential improvement in slippages. While loan growth was modest, NIM surprised on the upside. Motilal Oswal estimates the bank will deliver a return on assets (RoA) of 2.1% and return on equity (RoE) of 13.3% by FY27.

Nuvama

Nuvama maintained a ‘Hold’ rating on the stock, raising its target price to Rs 2,350 from Rs 2,040.

The brokerage noted that while NII and growth missed expectations, asset quality improved and slippages declined for the second straight quarter. Core PPOP was flat due to muted NIM and growth, though other income remained strong. The stock has rallied 20% since the Q3 results. Nuvama believes the bank is better positioned for growth and NIM, supported by lower fixed savings account rates and shorter tenor. Despite raising its EPS estimates and target price, Nuvama downgraded the stock to 'Hold' citing rich valuations.

Elara Capital

Elara Capital revised its rating on Kotak Mahindra Bank to Accumulate from Buy, raising the target price to Rs 2,330 from the earlier Rs 2,100.

The brokerage noted a soft Q4 performance and advised focusing more on the bank’s strategic direction and drift. Despite challenges, Kotak Mahindra Bank delivered a better performance for FY25. Elara believes the bank presents a steady and safe earnings compounding story in an otherwise uncertain operating environment. Additionally, asset quality trends remained strong, with lower slippages and improved coverage, offering lending comfort.



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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)