Kotak Mahindra Bank FY25 Annual Earnings Summary

NIM fell 20bps QoQ to 5.02% due to rising deposit costs and lower unsecured lending; further pressure could persist if CASA does not recover.

The tech embargo restricts digital onboarding for credit cards, limiting growth in unsecured retail and pressuring NIM.

Credit card and MFI slippages remain elevated due to over-leveraging and rural income slowdown; recovery may take 2-3 quarters.

Management could not provide a timeline for lifting the embargo, which continues to restrict credit card issuance and digital onboarding.

Microfinance delinquencies continue to rise; management expects stabilization only over the next two quarters, with potential for further slippages.

Management noted uncertainty whether microfinance industry changes are cyclical or structural, which could require business model changes.

Credit costs rose to 55bps annualized, driven by delinquencies in lower-ticket credit cards and microfinance; management tightened norms but risk remains.

Management declined to provide a specific timeline for lifting the embargo, citing dependence on RBI's comfort with progress and sustainability.

Delinquencies in microfinance rose in states like Tamil Nadu, MP, and UP due to heat waves and elections; recovery expected in H2 but uncertain.

The draft circular may require consolidation of lending subsidiaries into the bank, impacting capital allocation and business models.

NIM compressed 11bps QoQ due to shift to secured assets; further rate cuts could pressure yields, though deposit costs may lag.

Economic slowdown and volatility could lead to contagion in other portfolios, though no stress is currently visible in secured books.