IIFL Capital has maintained its ‘Reduce’ rating on Kotak Mahindra Bank (KMB) while raising the target price to ₹2,060 from ₹2,040. The revised TP reflects a 6% downside from the stock’s current market price of ₹2,180.10, as the brokerage flagged weak business momentum and expensive valuations.
Kotak’s core Q4FY25 PAT was 4% below consensus and IIFL’s own estimates, driven primarily by lower-than-expected net interest income (NII) and higher operating expenses. The miss was partially offset by strong ‘other income’.
Loan growth was described as soft, even with the inclusion of Standard Chartered’s loan portfolio. Additionally, average CASA growth of just 2% YoY was noted as the weakest among peers, and SA deposits have remained stagnant for three years—highlighting structural challenges in deposit mobilisation.
While recent cuts in savings account and term deposit rates could offer some temporary support to net interest margins (NIMs), IIFL cautioned that the widening gap between loan and CASA growth would likely continue to pressure profitability.
The brokerage cited three medium-term concerns:
- A flawed liability strategy
- Risk build-up with no buffer provisions, leading to likely higher credit costs
- A narrowing return on assets (ROA) gap versus peers
As a result, IIFL cut its earnings estimates by 2–3%, maintaining its cautious stance despite the upward revision in target price. The firm concluded that valuations remain stretched, given the bank’s subdued profitability when compared to peers.
Disclaimer: This report is for informational purposes only and does not constitute investment advice. Stock market investments are subject to market risks. Please consult a certified financial advisor before making any investment decisions.
