Earnings Outlook
Kotak Bank PAT seen down 45% on fall in NIM, asset quality
This story was originally published at 12:50 IST on 25 July 2025
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By Vaishali Tyagi
MUMBAI – Kotak Mahindra Bank Ltd.'s net profit for the June quarter is seen falling sharply year on year due to contraction in margin and worsening asset quality, analysts said. The country's fourth-largest private sector bank is expected to report a year-on-year decline of 45% in net profit for the June quarter to INR 34.64 billion, according to an average of estimates by 14 brokerages. Sequentially, the net profit is seen down 2.5%. Estimates for net profit range from INR 32.00 billion to INR 37.22 billion. The bank will announce its results Saturday.
The bank's net interest margin for the June quarter is expected to decline as net interest income is likely to grow slower than the pace of loan growth. In the Jan-Mar quarter, the net interest margin moderated to 4.97% from 5.28% a year ago, but rose from 4.93% in the December quarter. In the March quarter, the net interest income rose only 5% on year to INR 72.84 billion. The bank's net advances rose 14% on year to INR 4.447 trillion as of Jun. 30, as per the provisional figures released earlier this month. Sequentially, the net advances were up more than 4% from INR 4.270 trillion at the end of March.
Kotak Mahindra Bank may see a slight rise in loan and deposit growth following the Reserve Bank of India's Feb. 12 decision to lift restrictions on the bank related to onboarding of new customers through online and mobile banking channels and issuing new credit cards. "Lifting of (the) RBI embargo could lead to better loan and deposit growth, and the bank also plans to increase the share of unsecured loans from 10.5% to 15%, cushioning the net interest margin," broking firm Prabhudas Lilladher said.
In April 2024, the central bank had barred Kotak Mahindra Bank from taking on new customers through its online and mobile banking channels and issuing fresh credit cards after a review of the bank's information technology infrastructure raised "significant concerns", followed by the bank's repeated failure to address the same.
The bank's net advances rose 14% on year to INR 4.447 trillion as of Jun. 30, as per the provisional figures released earlier this month. Sequentially, the net advances were up over 4% from INR 4.270 trillion at the end of March.
Most brokerages expect Kotak Mahindra Bank's asset quality to deteriorate sequentially, although the views are divided. Motilal Oswal Financial Services expects asset quality to deteriorate slightly while Prabhudas Lilladher expects a sequential rise of 2 basis points in the bank's gross non-performing assets. However, Emkay Global Financial Services and YES Securities expect asset quality to be broadly stable on a quarter-on-quarter basis.
Kotak Mahindra Bank's gross non-performing asset ratio improved sequentially to 1.42% as at March-end from 1.50% as on Dec. 31, but worsened from 1.39% a year ago. On the other hand, net non-performing asset ratio improved to 0.31% from 0.41% at end of December and from 0.34% from the quarter a year ago.
Analysts at Prabhudas Lilladher expect credit cost to rise to 0.67% in Apr-Jun. The annualised credit cost for the bank decreased to 0.64% in Jan-Mar from 0.68% a quarter go, but was up from 0.42% previous year.
Most brokerages expect slippages for the June quarter to remain largely flat on a sequential basis. Fresh slippages during the March quarter were up 14% on year at INR 14.88 billion while upgradations and recoveries fell 3.2% to INR 7.47 billion. Fresh slippages worth INR 1.35 billion were upgraded within the same quarter. The provision coverage ratio of the bank was 78% as of March end.
Analysts will monitor the business growth of the bank this time around. Of the 21 brokerage reports available on the stock with Informist, 15 have a 'buy' rating with an average target price of INR 2,331, four have a 'hold' rating at an average target price of INR 2,140, and two have 'sell' rating at an average target price of INR 2,040.
At 1239 IST, shares of Kotak Mahindra were at INR 2,126.70 on the National Stock Exchange, down 0.7% from the previous close. The stock has risen 2.8% since the bank announced its March quarter results on May 3.
Following are the Apr-Jun earnings estimates for Kotak Mahindra Bank, in INR million, based on reports from 14 brokerage firms in descending order of net profit:
|
Brokerages |
Net Interest Income |
Net Profit |
|
Nirmal Bang Equities |
73,055.00 |
37,224.00 |
|
Anand Rathi Share and Stock Brokers |
75,011.00 |
37,191.00 |
|
Antique Stock Broking |
75,169.00 |
36,053.00 |
|
Emkay Global Financial Services |
74,143.00 |
35,553.00 |
|
ICICI Securities |
74,478.00 |
34,941.00 |
|
Motilal Oswal Financial Services |
72,258.00 |
34,792.00 |
|
Dolat Capital Market |
74,186.00 |
34,654.00 |
|
IIFL Capital Services |
73,000.00 |
34,600.00 |
|
JM Financial Institutional Securities |
74,215.00 |
34,301.00 |
|
Nuvama Wealth Management |
72,300.00 |
34,100.00 |
|
Prabhudas Lilladher |
73,486.00 |
33,319.00 |
|
Nomura Equity Research |
72,000.00 |
33,300.00 |
|
YES Securities (India) |
74,074.00 |
32,970.00 |
|
InCred Research Services |
73,000.00 |
32,000.00 |
|
Average |
73,598.21 |
34,642.71 |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Nishant Maher
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