CLSA has downgraded Kotak Mahindra Bank to ‘Hold’ from ‘Outperform’, even as it raised its target price to ₹2,225 from ₹2,125, following a mixed performance in Q4FY25. The brokerage noted that while the bank continues to enjoy strong fundamentals and a clean book, the earnings quality in the March quarter was weighed down by lower-than-expected core profitability and rising cost pressures.
Kotak Mahindra Bank reported a 14% YoY decline in net profit to ₹3,551.7 crore, compared to ₹4,133.3 crore in Q4FY24. On a sequential basis, profit showed modest improvement, but pre-provision operating profit (PPoP) missed CLSA’s estimates by 3%, largely due to a 4% YoY rise in net interest income (NII) to ₹7,283.6 crore, which came below expectations. At the same time, operating expenses rose at a faster clip, compressing the bank’s profitability.
Loan growth has also moderated, falling to the low-teens, which is a departure from the strong double-digit credit growth posted by private sector peers. CLSA believes this indicates a cautious lending environment and a more selective growth strategy.
Asset quality saw marginal improvement, with gross NPAs at ₹6,133.85 crore (1.42%) compared to ₹6,266.25 crore (1.50%) in Q3, while net NPAs dropped to ₹1,343.44 crore (0.31%) from ₹1,680.98 crore (0.41%). However, higher provisioning expenses—aimed at strengthening the provision coverage ratio—added pressure to quarterly profits.
CLSA has consequently revised its profit estimates down by 3–5% for FY26–27, factoring in lower NII growth and elevated opex trends, even as it sees the bank remaining fundamentally strong in the long term. The valuation remains fair, but with the margin vs. growth trade-off now evident, the stock may see limited upside in the near term.
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.
