Kotak Mahindra Bank Ltd, one of India’s leading banking and financial services groups, in its Q4 earnings call discussed their improved provision coverage ratio of 78% due to slowing NPA accretion and better unsecured loan quality. They explained their margin management strategy, including reducing savings account rates to 2.75-3.25% and adjusting term deposit rates in response to repo rate cuts. Management attributed the modest 1% QoQ NII growth despite margin expansion to fewer days in the quarter. On capital strategy, they acknowledged excess capital while seeking strategic acquisition opportunities and investing in alternative assets. The bank reaffirmed their growth target of 1.5-2x nominal GDP for FY26 and explained increased operating expenses resulted from post-embargo brand campaigns, PSL purchases, and higher provisions.
Kotak Mahindra Bank delivered a mixed performance with a consolidated profit after tax down 8% year-on-year in Q4 FY24, primarily due to higher provisions and margin pressures, though it grew 4.8% quarter-on-quarter. Net interest income rose 5.4% year-on-year, supported by a 15% year-on-year increase in average deposits and a 19.84% year-on-year advance growth. However, the net interest margin contracted to 4.97% from 5.28% year-on-year, reflecting higher funding costs. Asset quality improved, with gross non-performing assets at 1.42%, down from 1.50% quarter-on-quarter and net non-performing assets at 0.31%, down from 0.41% quarter-on-quarter, backed by a 78% provision coverage ratio. The bank’s capital adequacy ratio remained robust at 22.2%, with a CET1 ratio of 21.1%. Over the quarter, the bank lifted the RBI’s tech order in February 2025, enabling credit card issuance recovery, and advanced digital transformation with a new mobile app beta launch.
Continue Reading: Unearth the Vital Insights from Kotak Mahindra Bank Ltd’s Earnings Call!
Financial/Operational Metrics:
- Revenue: INR16,772 crores, up 11% YoY.
- Net Income: INR4,933 crores, down 8% YoY.
- EPS: INR24.81, down 8% YoY.
- Interest Income: INR7,160 crore, up 15%.
Outlook:
- Credit Cost: Elevated credit costs in microfinance expected to persist for two more quarters.
- Asset Growth: Target asset growth at 1.5 to 2 times nominal GDP growth in FY26.
Analyst Crossfire:
- Provisioning Coverage & Credit Cost Outlook (Kunal Shah – Citigroup)? Provision Coverage Ratio (PCR) improved to 78%, aided by slowing gross NPA accretion. New unsecured loans are of better credit quality, while legacy delinquent loans will continue to need provisioning. No firm guidance on credit cost due to external uncertainties, but personal loan stress is moderating and credit card delinquencies are stable (Management).
- Capital Management & Strategy, Credit Card Delinquencies vs. Peers (Anand Swaminathan – Bank of America)? KOTAK acknowledged having excess capital, which supports a “fortress balance sheet” strategy for risk management and seizing M&A opportunities. Investments are prioritized in core businesses, alternative assets, and financial market infrastructure, aiming for business-like returns on idle capital. Higher delinquencies attributed to younger post-COVID portfolios and not solely underwriting quality. Policies were tightened pre-embargo, and post-embargo credit card strategies now target lower risk with improved loss forecasts (Management).
- Net Interest Income & CASA Ratio Strategy (Param Subramanian – Investec)? Despite loan growth and margin expansion, QoQ NII growth was just 1% due to fewer days in February and the absence of one-off items like INR142 crore tax refunds present in the previous quarter’s NII. While SAR balances are flat YOY, the bank is focusing on affluent customer acquisition and bundled product strategies. Core SAR balances (especially up to INR10 lakh) are growing well, and the bank remains focused on maintaining cost competitiveness in funding (Shanti Ekambaram – President, Ashok Vaswani – CEO).
- SAR Deposit Cost Outlook, NII vs. NIM Growth (Piran Engineer – CLSA)? The fixed-rate SAR component is expected to trend toward 3%, while floating-rate SARs will depend on the MCLR and duration, contributing to the overall 3.79% SAR cost. NII growth appears muted despite NIM improvement due to a INR142 crore tax refund included in NII last quarter, which is excluded from NIM calculations (Shanti Ekambaram – President).
- SAR Growth Challenges & Operating Expense (OPEX) Jump (Piran Engineer – CLSA)? SAR balances remain stable due to competition and a high share of affluent clients preferring term deposits. The embargo on 811 accounts also impacted growth, though active money balances have grown ~47% YOY, supporting cost efficiency. OPEX increase was due to brand campaigns (post-embargo restart), higher actuarial provisioning due to falling VSEC rates, and increased ESOP costs linked to share price performance (Ashok Vaswani – CEO).
