Detailed narrative
Kotak Mahindra Bank concluded FY25 with a robust financial performance, demonstrating resilience amidst a challenging environment. The consolidated profit for FY25 stood at ₹22,126 crore, marking a 21% year-on-year increase. Excluding the one-off📎 gain from the KGI divestment, the consolidated profit grew by 5% YoY. The bank's consolidated net worth reached ₹157,395 crore, with book value per share growing 21% YoY to 792. On a standalone basis, the bank reported a profit of ₹16,450 crore, up 19% YoY, and an ROA (excluding KGI gain) of 2.2% for both the quarter and the full year. The group's AUM expanded significantly by 20% YoY to ₹6,69,000 crore, reflecting strong growth across its diverse businesses.
The bank navigated three notable events during FY25: a technology embargo impacting cards and 811 businesses, credit strains in the microfinance industry, and higher delinquencies in unsecured personal loans and credit cards. The share of unsecured loans to total net advances declined from 11.8% in FY24 to 10.5% in FY25, partly offset by the acquisition of Standard Chartered's personal loan portfolio. Proactive measures included tightening underwriting standards and reducing the retail microfinance book by 33% YoY, which now constitutes only 1.6% of total net advances. Despite these challenges, the microfinance business remained profitable on a full-year basis.
Strategically, Kotak Mahindra Bank is transitioning from a product-centric to a customer-centric approach to achieve scale. Key initiatives included the launch of a new mobile banking and 811 app, a group-wide brand campaign, and sharpened customer propositions like 'Solitaire' for the affluent segment. The bank's average advances grew 18% YoY in FY25, with end-of-period advances up 13% YoY to ₹4,44,000 crore. Average deposits also grew 16% YoY, maintaining a healthy CASA ratio of 43%. The NIM for the full year was 4.96%, with a sequential improvement to 4.97% in Q4, aided by savings account rate cuts and higher current account balances.
Looking ahead to FY26, management expressed a bullish outlook, anticipating continued asset growth of 1.5x to 2x nominal GDP growth. The lifting of the tech embargo has allowed the bank to restart its cards and 811 acquisition engines, which is expected to drive further growth. While credit costs for the old unsecured book are expected to require provisioning for the next couple of quarters, provisioning for the new book is anticipated to be lower. Microfinance credit costs are expected to remain elevated for two more quarters, with cautious growth planned until the industry trend clarifies. The bank also highlighted its focus on optimizing the cost of funds, with savings account costs expected to trend towards 3%.
The management team, led by Ashok Vaswani, conveyed a confident tone, emphasizing the strength of their diversified financial conglomerate model and their commitment to sustainable, long-term growth. They addressed questions on NII calculation and SA growth directly, providing detailed explanations for variances and strategic adjustments. Despite acknowledging global uncertainties and the need for cost correction where necessary, the overall sentiment was positive, underpinned by strategic investments in technology and customer experience.