Kotak Mahindra Bank Quarterly Results Q3 FY 25 stock analysis

Home » Financial News Hotbox » Results » Kotak Mahindra Bank – Q3FY25 Result Update

Check out the latest Result of Kotak Mahindra Bank for Q3FY25

Sector Outlook: Positive

Net profit up 10%; Decent performance across all parameters

Net Interest Income stood at Rs. 7,196 crores in Q3FY25, showing a growth of 2.5% QoQ / up 9.8% YoY. Pre-provision operating profit (PPOP) stood at Rs. 5,181 crores in Q3FY25, up 1.6% QoQ / up 13.5% YoY. Provisions on advances were Rs. 794 crores in Q3FY25, up 20.3% QoQ / up 37.1% YoY. The bank’s quarterly net profit stood at Rs. 3,305 crores in Q3FY25, down 1.2% QoQ / up 9.9% YoY. NIM stood at 4.93% in Q3FY25, up 2 bps QoQ / down 29 bps YoY. This was largely due to the higher cost of deposits for its savings account. Gross NPA stood at 1.50% in Q3FY25, up 1 bps QoQ / down 23 bps YoY. Net NPA stood at 0.41% in Q3FY25, down 2 bps QoQ / up 7 bps YoY. CASA Ratio further declined to 42.3% in Q3FY25 from 43.6% in Q2FY25 and 47.7% in Q3FY24. This was on account of Term deposits sweep of Rs. 54,797 crores. Gross Advances stood at Rs. 4,13,839 crores in Q3FY25, up 3.6% QoQ / up 15.1% YoY. Gross Deposits stood at Rs. 4,73,497 crores in Q3FY25, up 2.6% QoQ / up 15.8% YoY.

Key Concall Highlights

Net Interest Margin (NIM):

1. For Q3FY25, NIM declined by 29 basis points (bps) YoY but improved by 2 bps sequentially to 4.93%, supported by lower funding costs.

Non-Interest Income:

1. Increased by 14.2% YoY, with fee income growing 10.2% YoY.

Operating Expenses:

1. Up by 0.7% QoQ and 8.3% YoY, while the cost-to-income ratio reduced by 22 bps sequentially to 47.2%.

Provisions and Slippages:

1. Provisions rose by 37.1% YoY due to elevated slippages.

Loan Growth:

1. Overall loans grew by 3.6% QoQ and 15.1% YoY, reaching ₹4.13 trillion.
2. Home Loans and Loan Against Property (LAP) grew by 19% YoY.
3. Business banking loans increased by 23% YoY.
4. Personal loans and consumer durable loans grew at a slower pace of 10% YoY due to a cautious approach.
5. Retail microfinance loans declined by 16% QoQ and 3% YoY due to rising stress.

Loan Mix:

1. Total unsecured retail loans decreased to 10.5% of total loans from 11.3% in the previous quarter.
2. Corporate loans grew by 15% YoY, and SME loans rose by 31% YoY.

CASA Deposits:

1. Grew at 2.7% YoY but declined 0.4% QoQ.
2. CASA ratio dropped by 130 bps QoQ to 42.3%.

Asset Quality:

1. GNPA ratio was stable, rising slightly by 1 bps QoQ to 1.5%.
2. Net NPA declined by 2 bps QoQ to 0.41%.

Recoveries and Upgrades:

1. Stood at ₹7.62 billion, compared to ₹8.30 billion YoY.

Credit Metrics:

1. Standard restructured loans reduced to 0.05% of total loans versus 0.13% in Q3FY24.
2. SMA2 loans increased to ₹2.08 billion from ₹1.76 billion QoQ.
3. Credit cost for the quarter rose by 3 bps QoQ to 68 bps.
4. Personal loans had lower credit costs, while credit cards remained stable, and microfinance saw higher credit costs.

Segment-Wise Stress:

1. Credit card segment stress is stabilizing, but the bank is cautious about microloans.
2. Kotak Prime’s Net NPA increased by 10 bps QoQ to 1%, with higher delinquencies in two-wheeler loans.
3. Car financing (including dealer finance) grew by 16% YoY.

Kotak AMC Performance:

1. Assets under management (AUM) grew by ~39% YoY to ₹4.92 trillion.
2. Profit after tax (PAT) grew by 64% YoY.
3. Equity AUM rose by 51.2% YoY to ₹3.16 trillion.

Valuation and Outlook

Kotak Mahindra Bank (KMB) delivered a steady performance in Q3FY25, with net profit rising and notable improvement in Net Interest Margins (NIMs), contrasting with the compression observed among its peers. However, rising slippages and increased credit costs indicate potential challenges, particularly in the unsecured and microcredit portfolios, necessitating vigilant oversight. The bank has strategically shifted its focus toward lending in secured segments such as Loan Against Property (LAP) and home loans. This recalibrated product mix enhances portfolio stability and mitigates credit risk. A decline in the CASA ratio highlights the importance of reinforcing low-cost deposit mobilisation to sustain funding efficiency. Overall, KMB posted a decent performance in Q3FY25. KMB’s long-term success in sustaining credit growth and profitability will hinge on its management’s ability to navigate market challenges and implement strategies that balance growth with financial prudence in an evolving economic landscape.