Shares of Kotak Mahindra Bank dropped more than 6% in early trade on Monday, July 29, as investors reacted sharply to the bank’s first-quarter (Q1 FY26) results, which fell short of expectations on multiple fronts.
The bank reported a standalone net profit of ₹3,282 crore for Q1 FY26, down 7% year-on-year from ₹3,520 crore in Q1 FY25. The number reflects an adjusted profit figure, excluding a one-time gain from the divestment of Kotak General Insurance. On an unadjusted basis, net profit was higher at ₹6,250 crore.
One of the key drags on earnings was a sharp spike in provisions and contingencies, which surged 109% YoY to ₹1,208 crore. This weighed on overall profitability, despite a 6% increase in net interest income (NII) to ₹7,259 crore and a stable net interest margin (NIM) at 4.65%.
Asset quality, too, showed mild stress. Gross NPA inched up to 1.48% from 1.39% a year ago, while net NPA stood flat at 0.34%. The CASA ratio, a key indicator of deposit mix, fell to 40.9% from 43.4% last year. Return on equity (ROE) also moderated to 10.94% from 13.91%, reflecting the pressure on profitability.
From a segment perspective, the consumer loan book — the largest contributor — grew 16% YoY to ₹2.16 lakh crore. However, the credit card business remained in a rebuilding phase following the Reserve Bank of India’s earlier embargo. Executives flagged that new product launches like Solitaire are expected to drive growth gradually.
Brokerages were largely cautious post-earnings. Analysts flagged higher credit costs, asset quality deterioration, and continued pressure on profitability metrics as key concerns. Some also noted that Kotak is facing more headwinds in unsecured retail lending compared to peers like HDFC Bank and ICICI Bank. The earnings miss versus Street estimates (₹3,442 crore) further added to the downbeat sentiment.
While Kotak Mahindra Bank maintains a strong capital base — with a CAR of 23% and CET-1 ratio of 22.4% — the market reaction signals heightened investor sensitivity to near-term growth and credit quality challenges.
Disclaimer: The information provided is for informational purposes only and should not be construed as financial or investment advice. Investors are advised to consult their financial advisors before making any investment decisions.
