Kotak Bank Q3 Review: Analysts Raise Target Price On NIM Growth, Profitability

Most brokerages upgraded their rating on the shares of Kotak Mahindra Bank Ltd., after the lender reported better than expected business growth and stable margin in the third quarter of fiscal 2025.

Given its performance in October-December, with higher common equity tier-I and strong liquidity coverage ratio, the bank is better positioned to face the current environment, said Nuvama Institutional Equities.

The brokerage has upgraded the stock to 'buy' from 'reduce' and its target price by 26% to Rs 2,040 per share, as it sees Kotak Mahindra Bank offering both growth and quality.

"A marginal uptick in NIM, healthy loan growth, strong deposit growth and a QoQ decline in slippage with a higher PCR are the key positives," it said.

Motilal Oswal Financial Services Ltd. also raised its rating to 'buy' from 'hold' on the stock and its target price to Rs 2,100 per share from Rs 1,900 apiece, as the bank delivered a healthy operating performance amid challenging macro conditions.

With profitability outlook looking healthy, the brokerage has raised its earnings estimate and return on assets estimates to 2.2% for 2025-26 (Apr-Mar) and return on equities to 13.5%.

The management's commentary provided clarity on steps being taken to address the issue of the Reserve Bank of India's ban on its digital onboarding and the new credit card issuances will be one of the near-term catalysts for the stock, analysts said.

"These developments will not only aid business growth but also be pivotal to maintaining healthy margins and revenue growth led by the recovery in synergistic cross-selling avenues," Motilal Oswal said.

Nirmal Bang Institutional Equities also raised its rating on the scrip to 'buy' from 'hold' and its price aim to Rs 2,077 per share, up 6% as they turn positive on the bank.

While Emkay Global Financial Services has raised its target price too on the stock to Rs 1,750, it has retained its 'reduce' rating and cut its earnings estimates by 2-4%, as it is factoring in some growth moderation.

Brokerage Systematix Institutional Research also maintained its 'buy' rating on the stock, with an updated target price of Rs 2,100 per share, up nearly 5% as it factors in the removal of RBI ban in 2025-26, which will lead to an initial jump in credit disbursements, along with higher NIM prospects and associated operating expenses.

Dolat Capital Research has also tweaked its earnings estimate with slightly lower operational expenses and has retained its 'buy' rating and price aim of Rs 2,300.

Result on margins from lifting the RBI embargo and rationalisation of operational expenses should ensure an RoA of 2.1%.

Superior spreads along with contained credit costs and low leverage have worked in favour of the bank’s historically superior RoA metrics.

While early trends are encouraging, the ability to sustain industry best cost of funds, amid structural concerns around deposit growth remains to be seen, Dolat Capital said.