Kotak Mahindra Bank Q1 Results Mixed; KOTAKBANK Share Price Drops 3%

On July 22, investors capitalized on profits from Kotak Mahindra Bank, resulting in a 3% decline in its share price to ₹1,763 each, despite following the release of the bank’s strong Q1FY25 results. 

At 1:45 pm IST, Kotak Mahindra Bank share price settled at ₹1,759.10 apiece on the BSE. Despite the positive financial performance, brokerages had varied perspectives on the stock due to uncertainties about when the Reserve Bank of India (RBI) will lift its digital banking ban, which affects margin and loan growth projections.

Analysts at Morgan Stanley gave an 'overweight' recommendation for Kotak Mahindra Bank, raising the target price from ₹2,150 to ₹2,300 per share, suggesting a 30% potential increase. They noted substantial one-time gains, robust loan growth, and controlled expenses as major positives. They also pointed out that at a 1.7x price-to-book (PB) ratio for FY26, the bank's risk-reward profile appears favorable.

Motilal Oswal analysts maintained a 'neutral' stance with a target price of ₹1,800, highlighting the bank's strong performance despite the RBI’s ban on digital sourcing and new card issuance. They stressed the importance of lifting the ban for the bank to achieve sustained growth and profitability.

Jefferies issued a 'hold' rating and increased the target price from ₹1,790 to ₹1,960 per share, crediting the bank's subsidiaries' strong performance in capital markets.

Bernstein assigned a 'market-perform' rating with a target price of ₹1,750, expressing concerns about managing future growth and profitability. They remarked that the RBI’s digital restrictions had slowed unsecured loans and customer acquisition, and while corporate loan growth was strong, it affected margins.

JM Financial also gave a 'hold' rating with a target price of ₹1,830. Their analysts advised monitoring deposit growth, margin sustainability, and credit cost management closely. They remarked that despite the stock recovering from the RBI embargo-related losses, core momentum remained weak, with lower net interest margins (NIMs) and higher credit costs making further valuation improvements unlikely. Consequently, they reduced their estimates for FY25 and FY26 by 12%, factoring in lower NIMs, slightly higher credit costs, and the RBI embargo's impact.

For the April-June quarter of fiscal year 2025, Kotak Mahindra Bank reported a net profit of ₹6,250 crore, marking an 81% rise from ₹3,452 crore in the same period last year. This increase included ₹3,012 crore in profit after tax from selling a stake in Kotak General Insurance to Zurich Insurance Group.

The bank's net interest income rose to ₹6,842 crore, a 10% increase from ₹6,234 crore the previous year. However, the growth of its unsecured loan book saw a sequential drop of 20 basis points to 11.6% from 11.8%. The net interest margin (NIM) remained stable at 5.02% quarter-on-quarter but declined by 55 basis points year-on-year from 5.57% in Q1FY24.

"Q1 FY25 saw the completion of a landmark deal in General Insurance sector with Zurich Insurance Group taking a 70% stake in Kotak General Insurance. The alliance brings together Zurich's global insurance leadership and scale with Kotak's local expertise and reach. Post this transaction, Kotak Bank holds 30% stake in KGI and will continue to act as corporate agent of KGI for distribution of general insurance products," the company stated.

Kotak Mahindra Bank Ltd (Kotak) is a comprehensive and integrated financial services conglomerate in India. The bank's core activities span consumer banking, commercial banking, wholesale banking, insurance, and wealth management. Its diverse range of products and services includes savings and current accounts, loans, credit cards, foreign exchange services, custody services, mutual funds, pension fund management, asset reconstruction, investment banking, and insurance products.