The recent performance of Kotak Mahindra Bank has caught the attention of investors as its share price witnessed a significant decline of 5.45%, hitting a low of Rs 2,066 on the National Stock Exchange. This drop comes in the wake of key brokerages adjusting their ratings following the bank’s substantial provisioning in Q4FY25. Let’s delve into the details of these developments.

Nomura’s Downgrade to Neutral

Nomura, a prominent international brokerage, has revised its stance on Kotak Mahindra Bank, shifting from a ‘Buy’ to a ‘Neutral’ rating. This change stems from the bank’s disappointing quarterly performance, characterized by a decline in net interest income and increased operating expenses. Nomura projects a 2-2.1% return on assets and a 12-13% return on equity for the fiscal years 2026-2028. Interestingly, they slightly raised their target price from Rs 2,110 to Rs 2,200 per share. The bank reported a 13.5% year-on-year loan growth, buoyed by strong performance in secured loans, although credit cards and micro-finance experienced declines of 5% and 19% quarter-on-quarter, respectively.

Nuvama’s Assessment: Downgrade to Hold

In a similar vein, Nuvama Institutional Equities has also downgraded its rating for Kotak Mahindra Bank from ‘Buy’ to ‘Hold’. They acknowledged an improvement in the bank’s asset quality, noting a reduction in slippage for the second consecutive quarter and an enhanced provision coverage ratio, which increased from 73% to 78%. However, the bank’s loan growth of 14% YoY and 3% QoQ, falling short of the 4% expected growth for the quarter, was a cause for concern. Nuvama stated, “We believe Kotak Mahindra Bank is strategically positioned for growth and its net interest margin (NIM) is more favorable compared to competitors due to its reduced fixed savings accounts and shorter tenors.”

Motilal Oswal: Sustaining a Buy Rating

On a more optimistic note, Motilal Oswal, a domestic brokerage, has chosen to maintain its ‘Buy’ rating on Kotak Mahindra Bank, with a target price set at Rs 2,500 per share. They highlighted a mix of results, particularly noting that the net interest income largely aligned with expectations while other income surged, driven by better fee income. The bank has also increased its provisioning run rate and improved its PCR. The recent reversal of the ban on card issuance is expected to boost customer onboarding, which could help safeguard yields amid the ongoing repo rate cuts.

Overview of Kotak Mahindra’s Q4 Results

In its latest quarterly results, Kotak Mahindra Bank reported a 14% year-on-year decline in net profit, amounting to Rs 35,517 crore in Q4FY25, compared to Rs 41,333 crore in the same quarter of the previous year. This drop in profit is largely attributed to substantial provisions set aside for potential bad loans, overshadowing the bank’s robust loan growth. However, the bank’s net interest income did grow by 5%, reaching Rs 72,840 crore, while the NIM decreased to 4.97% from 5.28% a year earlier, though it showed a slight improvement from 4.93% in the previous quarter.

In summary, while Kotak Mahindra Bank faces challenges reflected in its stock ratings, certain brokerages maintain a positive outlook on its growth potential. Investors will be keenly observing how the bank navigates these turbulent waters in the coming quarters.