Kotak Mahindra Bank shares rise 5% post Q4 results

Shares of Kotak Mahindra Bank rose 5.4% in opening trade on Monday after several analysts upgraded the private lender after it reported earnings on Saturday.

The stock opened at ₹1,600 against its previous closing price of ₹1,547.25.  It hit an intraday high of ₹1,632 on the BSE, taking the company’s market cap to ₹3.23 lakh crore.

Analysts from CLSA, Nomura and JPMorgan upgraded the stock after the private lender reported a 17% year-on-year jump in its fourth-quarter consolidated net profit at ₹5,337 crore compared with ₹ 4,566 crore in Q4 FY23. Profit for FY24 increased to ₹18,213 crore from ₹ 14,925 crore in FY23, up 22% year-on-year. On a standalone basis, the lender’s net profit was ₹4,133.3 crore, up 18.24% year-on-year.

Net Interest Income (NII) for FY24 increased to ₹25,993 crore, from ₹21,552 crore in FY23, up 21% on a yearly basis. Net interest income in Q4 FY24 increased to ₹6,909 crore, from ₹6,103 crore in Q4 FY23, up 13%. Net Interest Margin (NIM) was 5.28% for Q4 FY24.

Ashok Vaswani, managing director and CEO of Kotak Mahindra Bank, during an analyst call said the impact on the bank's profitability due to the restrictions placed by the Reserve Bank of India (RBI) could be ₹300 crore to ₹400 crore.

"It's very back of the envelope, it has lots of assumptions but obviously, our effort is to try and mitigate as much of it as possible," Vaswani said.

In April, the RBI directed the private lender to stop on-boarding of new customers through its online and mobile banking channels and issuing fresh credit cards. The banking regulator said its actions are necessitated based on significant concerns arising out of Reserve Bank’s IT examination of Kotak Mahindra Bank for the years 2022 and 2023 and the continued failure on part of the bank to address these concerns in a comprehensive and timely manner. “Serious deficiencies and non-compliances were observed in the areas of IT inventory management, patch and change management, user access management, vendor risk management, data security and data leak prevention strategy, business continuity and disaster recovery rigour and drill, etc,” the RBI said.

In the absence of a robust IT infrastructure and IT Risk Management framework, Kotak Mahindra Bank’s Core Banking System (CBS) and its online and digital banking channels have suffered frequent and significant outages in the last two years, the recent one being a service disruption on April 15, 2024, resulting in serious customer inconveniences, as per the RBI.

Kotak Mahindra Bank is found to be materially deficient in building necessary operational resilience on account of its failure to build IT systems and controls commensurate with its growth, the RBI said. In the past two years, the Reserve Bank has been in continuous high-level engagement with Kotak Mahindra Bank on all these concerns with a view to strengthening its IT resilience, but the outcomes have been far from satisfactory, it added.

(DISCLAIMER: The views and opinions expressed by investment experts on fortuneindia.com are either their own or of their organisations, but not necessarily that of fortuneindia.com and its editorial team. Readers are advised to consult certified experts before taking investment decisions.)