Bernstein has maintained a ‘Market-Perform’ rating on Kotak Mahindra Bank, assigning a target price of ₹1,950, after the bank reported a YoY earnings decline of 14% for the March quarter, impacted by higher provision expenses and soft deposit trends.
In its Q4FY25 results, the bank reported a net profit of ₹3,551.7 crore, down from ₹4,133.3 crore in the year-ago period. However, profits rose 7% on a sequential basis. While net interest income grew 4% YoY to ₹7,283.6 crore, the pace of growth lagged both historical trends and peer performance. Deposit growth came in at 11% YoY, which is notably lower than what ICICI Bank and HDFC Bank reported during the same period.
Bernstein pointed out that while seasonal improvements in CASA deposits helped the bank maintain its margin levels, the cost structure—especially opex and credit provisions—eroded RoA improvement opportunities. They noted that Kotak continues to maintain NIMs through strong retail spreads and conservative asset-liability management, but the rising provisioning and weak top-line growth limit earnings upside.
Asset quality remains one of the bank’s key strengths, with gross NPA declining to 1.42% and net NPA improving to 0.31%, reflecting healthy underwriting and limited credit risk. However, this alone was insufficient to offset the earnings drag from muted topline and increased costs.
Bernstein’s core view is that Kotak now faces a strategic inflection point where it must balance growth acceleration with margin preservation. In a competitive market environment with declining interest rates, such a trade-off could influence investor sentiment and stock performance.
Disclaimer: The above views are those of the brokerage and not the publication. Investors are advised to consult a certified financial advisor before making investment decisions.
