Explained: Why Kotak Mahindra Bank shares gained over 5% today

Shares of Kotak Mahindra Bank surged by 5.5% today following the release of its quarterly earnings report, which surpassed market expectations.

The bank also reassured investors that the recent regulatory actions by the central bank would not have a massive impact on its financial performance.

Kotak Mahindra Bank shares were trading at Rs 1,630.45 up by 5.41% at the time the article was being written. 

The last time, shares of the private lender were up by 5.2% at Rs 1,626, was on April 11, 2023, after seeing the largest intraday increase. 

Kotak Mahindra Bank has experienced a decline of 14.7% since the beginning of this year, largely attributed to regulatory constraints imposed by the Reserve Bank of India (RBI) that barred the bank from acquiring new digital clients and issuing credit cards.

While Kotak Mahindra Banks's shares have gone down, the Nifty bank index has increased by 1.7% during the same period.

During a call with analysts on Saturday, Kotak CEO Ashok Vaswani said that the impact of RBI's directives is expected to be minimal, affecting the bank's pre-tax profits by approximately Rs 300–450 crore in the fiscal year 2024-25.

Following these developments, Nomura upgraded its rating on Kotak Mahindra Bank from neutral to buy, setting a target price of Rs 2,040, citing the current stock valuation as an attractive investment opportunity.

Similarly, JP Morgan also revised its rating from neutral to overweight with a target price of Rs 2,070, influenced by favorable valuations.

"We expect growth to remain higher than industry average despite RBI sanction," PhillipCapital analysts told Reuters. 

The bank's financial results for the fourth quarter revealed a 26% increase in net profit, surpassing analyst forecasts. This growth was driven by higher income from core lending activities and robust loan expansion.

Kotak Mahindra Bank's standalone profit for Q4 FY24 rose by 18.22% year-on-year (YoY) to Rs 4,133.30 crore. Additionally, the bank's net interest income (NII) for Q4 increased by 13% YoY to Rs 6,909 crore.

The bank's asset quality also improved, with gross non-performing assets (GNPA) and net non-performing assets (NNPA) at 1.4% and 0.3%, respectively, compared to 1.7% and 0.3% in the previous quarter. Slippages during the quarter amounted to Rs 1,305 crore.