Kotak Mahindra Bank top Nifty loser as Q2 results disappoint Street, RBI embargo may weigh on outlook

Kotak Mahindra Bank shares fell over 4 percent to Rs 1,785 on October 21 after its September quarter results missed Street expectations. Weaker loan growth, higher slippages, shrinking margins, and the RBI's restrictions on its digital banking operations impacted the bank’s Q2 performance, with brokerages warning that these challenges could remain key concerns moving forward.

Jefferies shared a 'hold' call on Kotak Mahindra Bank with a target price of Rs 2,080 per share, saying that the clarity on RBI embaro is key for future performance. Earlier this year, the RBI barred the private lender from onboarding new customers through its online and mobile banking channels and issuing fresh credit cards as deficiencies in the areas of IT inventory management was found.

Goldman Sachs, too, remained cautious on the counter due to miss in Q2 results. The main feature disappointing in Kotak's Q2 performance were muted trends in asset quality. Both slippages and credit costs were higher than estimates, they noted. However, they retained a 'buy' call on the counter with a target price of Rs 2,286 per share as loan growth and pre-provision operating profit growth remained healthy.

Kotak Mahindra Bank's net profit rose 4 percent year-on-year in Q2FY25 to Rs 3,344 crore, falling short of Street's estimated Rs 3,494 crore. Net interest income, meanwhile, jumped 11 percent YoY to Rs 7,020 crore in Q2FY25. However, net interest margin (NIM) moderated to 4.91 percent from 5.22 percent a year ago.