Kotak Mahindra Bank shares fall 5% after weak Q4 results; should you buy, sell, or hold?

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Shares of Kotak Mahindra Bank tumbled 5 percent to Rs 2,085 apiece on May 5, following the release of its weaker-than-anticipated March quarter (Q4FY25) results. The private lender reported a miss on key performance metrics, and deterioration in asset quality further weighed on sentiment. As a result, several brokerages downgraded the stock, viewing current valuations as expensive.

CLSA downgraded the stock to “Hold” from “Outperform,” even as it raised the target price to Rs 2,225 from Rs 2,125 per share. The brokerage described the Q4 performance as mixed, noting that pre-provision operating profit (PPoP) missed estimates by 3 percent due to weaker Net Interest Income (NII) and higher operating expenses.

Credit costs also rose, as the bank increased its provision coverage ratio. Loan growth moderated to the low-teens, prompting CLSA to cut profit estimates by 3–5 percent, factoring in lower NII and higher cost assumptions.

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Bernstein also expressed a cautious stance, maintaining a “Market-Perform” rating with a target price of Rs 1,950 per share.

It pointed out that earnings per share (EPS) declined 13 percent year-on-year (YoY), although there was a 7 percent improvement quarter-on-quarter (QoQ), primarily due to increased provisioning.

Deposit growth slowed to 11 percent YoY, lagging behind peers such as ICICI Bank and HDFC Bank. While seasonal improvement in the current account–savings account (CASA) ratio and stable loan growth helped sustain margins, elevated operating expenses and provisioning limited any significant improvement in return on assets (RoA).

The brokerage said that the results highlight an ongoing margin-versus-growth trade-off for the bank in the near term.

Elara Capital, meanwhile, described Kotak Mahindra Bank’s Q4 performance as lacking strength in its core fundamentals. The quarter was marked by tepid NII growth and below-trend loan expansion.

According to the brokerage, future discussions are likely to focus on the bank’s ability to balance growth with margin outcomes and core profitability. Despite the underwhelming quarter, Elara maintained a positive long-term view, calling Kotak Mahindra Bank a “safe earnings compounding story” amid broader sector headwinds. It raised its target price to Rs 2,330 from the earlier Rs 2,100 per share.

In terms of financial performance, Kotak Mahindra Bank reported a 14 percent decline in net profit, which fell to Rs 3,552 crore in Q4FY25, largely due to a sharp rise in provisions for bad loans. Interest income for the January–March quarter increased 10 percent YoY to Rs 13,529.77 crore, compared to Rs 12,307.06 crore in the corresponding quarter of the previous year.

The bank's provisions for bad loans surged 245 percent to Rs 909 crore in Q4FY25, up from Rs 264 crore in the year-ago period. Gross non-performing assets (NPAs) inched up by 3 basis points to 1.42 percent, compared to 1.39 percent a year earlier.

However, net NPAs declined by 3 basis points to 0.31 percent, down from 0.34 percent in the same quarter last year, indicating improved recovery and provisioning measures.