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On Monday, BofA Securities adjusted its stance on Kotak Mahindra Bank (NSE:KTKM) Ltd. (KMB:IN), downgrading the stock rating from Buy to Neutral while increasing the price target to INR2,400.00, up from INR2,300.00. The change in rating follows Kotak Mahindra Bank’s fourth-quarter financial results, which reported a net profit of Rs35.5 billion, indicating an 8% increase quarter-over-quarter but a 14% decrease year-over-year.
The downgrade was attributed to several factors that fell short of expectations, including weaker-than-anticipated loan growth at 3.2% quarter-over-quarter and 13.5% year-over-year, higher credit costs at 85 basis points, and only a marginal improvement in net interest margins (NIMs) despite multiple one-time supports. Additionally, the bank experienced a significant operational expense growth of 8% quarter-over-quarter and 14% year-over-year.
BofA Securities noted that the main area of concern was the bank’s slowing loan growth momentum. Furthermore, the forward-looking commentary for the fiscal year 2026 suggested lower conviction than anticipated. The analysis by BofA Securities indicated potential downside risks to the bank’s return on assets (RoA) for the upcoming fiscal year, driven by softer NIMs, persistent operational expenses, and high credit costs, particularly in the first half of the year.
The report concluded that a significant recovery in high-yield loan growth is unlikely until there is an improvement in the macroeconomic environment. Despite the downgrade, the increase in the price target to INR2,400 reflects an adjustment to the bank’s valuation based on the latest financial outcomes and market conditions.
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