Analysts had expected the bank to report a profit of ₹3,625 crore, as per LSEG estimates
| Photo Credit:
BIJOY GHOSH

Kotak Mahindra Bank on Saturday reported a larger-than-expected 14 per cent drop in quarterly profit as provisions for potential bad loans surged, offsetting solid loan growth.

The Mumbai-based private lender’s standalone net profit – which excludes earnings from its subsidiaries – fell to ₹3,552 crore in the three months to end-March.

Analysts had expected the bank to report a profit of ₹3,625 crore, as per LSEG estimates.

Kotak’s provisions and contingencies, or funds set aside for potential bad loans, tripled to ₹909 crore.

Its gross non-performing assets ratio, a key gauge of asset quality, was 1.42 per cent at the end of March compared with 1.50 per cent at the end of December.

Kotak’s loans rose 13 per cent in value terms in the March quarter, while deposits were up 15 per cent.

In February, the Reserve Bank of India (RBI) lifted a 10-month ban on Kotak that barred the lender from issuing credit cards and enrolling clients digitally due to gaps in its IT systems.

Its net interest income, the difference between what a bank earns on loans and pays out on deposits, rose 5 per cent to ₹7,284 crore.

The net interest margin shrank to 4.97 per cent from 5.28 per cent a year earlier, but was higher than 4.93 per cent reported in the previous quarter.

In a falling interest rate scenario, lenders typically pass on central bank rate cuts to borrowers, making loans more attractive, but the pass-through to deposit rates comes with a lag, temporarily compressing margins until the adjustment is fully reflected across both sides of the balance sheet.

A majority of Kotak’s loan book is linked to the external benchmark, putting its margins under pressure.

Shares of the lender ended 0.9 per cent lower on Friday ahead of the results.

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Published on May 3, 2025