Kotak Bank | Shares of Kotak Mahindra Bank witnessed a significant decline of over 5% on May 5, following the release of its Q4 results for the financial year 2024-25. The bank’s net profit saw a 14% year-on-year drop, sparking concerns among investors. At the start of the trading session, Kotak Mahindra Bank’s shares were valued at ₹2,091.20 on the National Stock Exchange (NSE), falling by 4.3%. By 10:11 AM, they had slipped further by 5.59%, trading at ₹2,063 per share.
Sharp Rise in Provisions for Bad Loans
Kotak Mahindra Bank’s provisions surged dramatically by more than three times, from ₹264 crore in Q4 FY24 to ₹909 crore in Q4 FY25. This sharp increase was primarily driven by the bank’s efforts to set aside more capital against potential bad loans, impacting its bottom line. The net profit for Q4 FY25 stood at ₹3,551.74 crore, down from ₹4,133.30 crore in the same period of the previous year.
Stable Asset Quality Amid Challenges
Despite the drop in profits, the bank reported improved asset quality. The gross non-performing assets (NPAs) decreased slightly to 1.42% from 1.50% in the previous quarter, while net NPAs fell to 0.31% from 0.41%. This shows that the bank has managed to control the rise in bad loans, which is a positive development amidst the financial challenges.
Impact of Policy Rate Cuts and RBI Restrictions
The bank also faced challenges due to the impact of policy rate cuts and the restrictions imposed by the Reserve Bank of India (RBI) on its credit card business. Kotak Mahindra Bank’s CEO, Ashok Vaswani, stated that the bank is aiming to return to pre-restriction levels of monthly credit card issuances within six months. Moreover, the bank’s Microfinance Institution (MFI) book, which halved to ₹4,500 crore in the last year, also contributed to the decline in net interest margins.
Subsidiaries Boost Profit Growth
On a positive note, Kotak Mahindra Bank’s subsidiaries contributed more significantly to the overall group profits, accounting for 29%. Kotak Mahindra Prime’s net profit grew by 34% to ₹297 crore, while its asset management arm recorded a 149% jump in net profit to ₹529 crore, which provided some cushion to the overall results.
In spite of the tough quarter, the bank’s full-year performance showed improvement, with a 19% rise in net profit to ₹16,450 crore for FY25, compared to ₹13,782 crore in FY24.
The decline in quarterly profits coupled with a surge in provisions and external challenges weighed heavily on Kotak Mahindra Bank’s stock. However, the improvement in asset quality and growth in subsidiary contributions offer some optimism for the bank’s long-term outlook.