Kotak Mahindra Bank Quarterly Results Q4 FY 25 stock analysis

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Sector Outlook: Positive

Net Profit Declines 14% YoY on Elevated Provisions; Mixed Performance Across Key Metrics, but Outlook Remains Positive

Net Interest Income stood at Rs. 7,284 crores, up 1.2% QoQ / up 5.4% YoY, driven by robust growth in the Commercial Vehicle (CV) segments. Pre-Provision Operating Profit (PPOP) came in at Rs. 5,472 crores, up 5.6% QoQ / up 0.2% YoY. Provisions rose to Rs. 909 crores, up 14.5% QoQ / up 244.3% YoY. Fresh slippages of Rs. 135 crores during Q4FY25 were upgraded within the same quarter (Q3FY25: Rs. 210 crores). Net Profit (PAT) stood at Rs. 3,552 crores, up 7.5% QoQ / down 14.1% YoY, impacted by elevated provisioning in current quarter. CASA Ratio stood at 43.0%, up 70bps QoQ / down 250bps. CASA ratio remains slightly above par compared to other large private players. Return on Assets (ROA) came in at 2.19%, down 11bps QoQ / down 78bps YoY. Net Interest Margin (NIM) stood at 4.97%, up 4bps QoQ / down 31bps YoY, as compression was witnessed due to higher cost of funds and the impact of repo rate cuts. Gross Advances rose to Rs. 4,26,909 crores, up 3.2% QoQ / up 13.5% YoY. Home loans, Personal loans and consumer segments witnessed strong growth, while the microcredit segment continued to see reduced exposure, now down 33% YoY. Unsecured retail advances (including retail microcredit) accounted for 10.5% of net advances. Gross Deposits stood at Rs. 4,99,055 crores, up 5.4% QoQ / up 11.2% YoY, supported by strong 25% growth in term deposits. TD sweep balances remained stable. Capital Adequacy Ratio (CAR) stood at 22.2%, down 59bps QoQ / up 170bps YoY. Gross NPA (GNPA) came in at 1.42%, down 8bps QoQ / up 3bps YoY, with stable asset quality across segments. Net NPA (NNPA) improved to 0.31%, down 10bps QoQ / down 3bps YoY. Kotak Securities, the capital markets arm, continued to outperform with PAT rising by 33%. Overall market share remained steady at 11.6%. The Board of Directors of the Bank has recommended a dividend of Rs. 2.50 per equity share having face value of Rs. 5, for the year ended March 31, 2025, subject to approval of shareholders.

Key Concall Highlights

Advances

Overall growth: Total advances grew 13% YoY, with average advances rising 18% YoY, in line with KMB’s strategy of growing 1.5–2x of nominal GDP.
Unsecured portfolio: Share declined to 10.5% (from 11.8% YoY) due to slowdown in micro-credit and credit cards. Credit-Deposit Ratio (CD Ratio): Maintained at a healthy 85.5%.

Consumer Assets

Mortgage Business

Home loans and LAP grew 19% YoY, with strong Q4FY25 traction.
Asset quality remains pristine, supporting long-term growth and customer stickiness.
LAP grew steadily, with enhanced focus on the self-employed segment.

Secured Business Banking

Loans to small and micro enterprises grew 19% YoY.
Portfolio quality remains strong across geographies.
Remains a key focus area; business is largely branch-led with both financial and non-financial product offerings.

Unsecured Business

Personal loan growth slowed due to a 5-month embargo and tightened underwriting.
Growth primarily came from existing-to-bank (ETB) customers via repeat/top-up loans.
Slippages have plateaued; expected to improve further in H2FY26.
Credit card portfolio was impacted by issuance restrictions; focus remained on increasing spend from ETB customers.
Segment stress is in-line with industry trends, with improved flow metrics in Q4FY25.
New initiatives and product launches are planned to drive future growth.

Wholesale book

Mid corporate book – New customer acquisition was a major focus area, but aggressive pricing exists. KMB continues to invest in tech and customer outreach.
Large corporate: This segment remains very competitive. KMB de-grew short-term advances at the end quarter and focused on credit substitutes such as bonds and CP. Transaction banking and flow have been good (continue to support fee income).
NIM came in at 4.97% (up 4bps QoQ) due to higher CA balances, SA rates and day count benefit (marginal). On the other hand, NIM was down 31bps YoY due to higher cost of funds and lower unsecured mix.

Asset quality

GNAP/NNAP stood at 1.42%/0.32% with PCR at 78%.
Personal loan slippages and credit cost are reducing, while credit card slippages and credit cost are at the same level. On the other hand, credit cost and slippages in the microfinance business remain elevated (expect this to continue). The secured book is negligible.
Slippage reduced to INR 14.4bn due to reduction in secured and personal loan business.

Valuation and Outlook

Kotak Mahindra Bank reported mixed results for Q4FY25. While loan growth remained strong and exceeded industry averages, profitability came under pressure, as indicated by a sequential decline in net profit. NIMs also moderated during the quarter, primarily due to the prevailing interest rate environment. In terms of asset quality, the bank experienced an increase in slippages and credit costs, particularly in the unsecured and microcredit segments, which require careful oversight in the near term. However, the strategic shift towards secured lending, especially in Loan Against Property (LAP) and home loans, has supported steady growth in advances. We expect this momentum in advances and deposits to continue and remain above industry levels in FY26. Asset quality appears to have stabilized, although provisions increased during the quarter. We believe this rise is precautionary and expect it to normalize going forward. The decline in the CASA ratio highlights the need to strengthen low-cost deposit mobilization to ensure sustainable funding efficiency. Overall, KMB’s performance in Q4FY25 was stable, despite some challenges. Its ability to maintain credit growth, manage asset quality, and navigate margin pressures will be vital for long-term performance. We remain optimistic about the stock from a medium- to long-term perspective, with guidance on NIMs and asset quality for FY26 being critical factors to monitor.