State Bank of India, Kotak Mahindra Bank shares fall on soft earnings

Shares of SBI closed at Rs 790 on the BSE while Kotak Mahindra Bank's shares closed at Rs 2,085.05

Shares of State Bank of India (SBI) and Kotak Mahindra Bank tumbled on Monday after the banks reported weak quarterly earnings in the fourth quarter (Q4) of 2024-25 (FY25) over the weekend. 

 

While SBI’s share price declined 1.26 per cent, Kotak Mahindra Bank’s shares shed over 4.5 per cent on Monday. Shares of SBI closed at ₹790 on the BSE while Kotak Mahindra Bank’s shares closed at ₹2,085.05.

 

SBI’s net profit declined 10 per cent year-on-year (Y-o-Y) to ₹18,643 crore in Q4FY25 due to higher provisions. Net interest income (NII) of the lender grew only 2.69 per cent Y-o-Y to ₹42,775 crore. The lender’s net interest margin (NIM) dropped to 3 per cent in Q4FY25, from 3.1 per cent in the previous quarter, and 3.3 per cent in the year-ago period.

 

“SBI posted a slightly soft quarter, as credit growth moderated to 12.4 per cent Y-o-Y due to pre-payments in the corporate book, while higher operational expenditure (staff cost and deposit insurance) and provisions (standard assets, investment, and production-linked incentives) caused a 5 per cent earnings miss,” according to an Emkay report. 

 

“Management kept NIM guidance at 3 per cent in FY26, which is surprising as it factors in a 100 bps (basis points) rate cut in this cycle. It expects NIM decline on account of rate cuts to be limited given the repo-linked book exposure at 29 per cent and some transmission potential through deposit cuts,” Macquarie Capital said in its report.

 

Kotak Mahindra Bank reported a 14 per cent Y-o-Y decline in net profit to ₹3,552 crore in Q4FY25, owing to higher provisions, and higher operational expenses. The bank’s NII was up 5 per cent Y-o-Y to ₹7,284 crore while other income was up 7 per cent Y-o-Y to ₹3,182 crore.

 

Its NIM stood at 4.97 per cent in Q4FY25, compared to 5.28 per cent in the corresponding period a year ago.

 

Slippages in the quarter were higher on a Y-o-Y basis but lower sequentially. Loan growth was modest at 13.5 per cent Y-o-Y and 3.2 per cent quarter-on-quarter, amid a decline in corporate banking as well as credit cards. 

 

Personal loans, business loans, and consumer loans have picked up significantly after the lifting of the Reserve Bank of India embargo.

 

According to Macquarie Capital’s report, the management has indicated that while slippages in the personal loan segment have started declining, credit cards and microfinance slippages remain elevated. Accordingly, it expects credit costs to remain elevated over the next two quarters.

 

“While FY25 growth remained modest, the bank expects the same to rebound to 1.5-2x of nominal GDP (gross domestic product) growth backed by faster growth in the consumer segment and unsecured loans that should also support the overall yields,” Motlial Oswal said in its report.  (Disclosure: Entities controlled by the Kotak family have a significant holding in Business Standard Pvt Ltd)