Kotak Mahindra Bank Q4 Results: High Provisions For MFI Weighs On Net Profit

Kotak Mahindra Bank Ltd. reported a fall in its fourth-quarter standalone net profit on the back of higher provisions made for its distressed microfinance institution loan book.

The lender's net profit dipped 14% year-on-year to Rs 3,552 crore in the quarter ended March 31, 2025. Analysts polled by Bloomberg estimated the private sector bank's profit after tax to be at Rs 3,606 crore.

This was due to a sharp rise in provisions, which rose to Rs 909 crore during the quarter from Rs 264 crore a year ago.

This has come as the stress in the microfinance institution business weighed significantly on the bank's financial performance in the year ended March, Managing Director and Chief Executive Officer Ashok Vaswani said.

He expects the stress to peak in the first quarter of this financial year. The bank has reduced its share of its microfinance book to its overall advances to 1.6% at the end of March from 2.5% earlier.

The net interest income rose over 5% year-on-year to Rs 7,284 crore. Consequently, net interest margins were 4.97% as of March-end, higher than 4.93% a quarter ago.

"...Given that our liability repricing is much shorter, we expect to manage the NIM correction in the faster manner. For the short-term period, there will be some pressure on NIMs," Chief Financial Officer Devang Gheewalla said, post the earnings conference.

The private sector bank's asset quality was largely stable, with the gross non-performing assets ratio falling to 1.42% as of March quarter compared with 1.5% in the previous quarter. The net NPA ratio fell to 0.31% from 0.41% in the prior quarter.

As at March 31, provision coverage ratio stood at 78%. Fresh slippages fell to Rs 1,488 crore from Rs 1,657 crore a quarter ago.

Recoveries and upgrades stood at Rs 747 crore from Rs 762 crore a quarter ago. Credit costs, moderated slightly to 0.64% from 0.68% a quarter ago.

The bank's advances increased 13% year-on year to Rs 4.44 lakh crore as of March end. Unsecured retail advances, including retail microcredit as a percentage of net advances were 10.5%, unchanged from the previous quarter.

Among customer assets, the consumer segment, which contributes the most, rose 17% to Rs 2.08 lakh crore, followed by corporate and commercial rising 6% each year-on-year.

The small-medium enterprises book of the bank grew 31% on-year in the March quarter.

Total deposits rose 15% on year to Rs 4.68 lakh crore.

The current account-savings account ratio was 43.0% at the end of March, against 42.3% a quarter ago and 45.5% a year ago.