Kotak Bank's Q2 Consolidated Net Profit Down 11% Y-o-Y

Kotak Bank's Q2 Consolidated Net Profit Down 11% Y-o-Y

Kotak Mahindra Bank reported an 11.4% year-on-year (Y-o-Y) decline in consolidated net profit for the second quarter of the fiscal year 2025-26 (Q2 FY26), primarily attributed to higher provisions and a dip in other income. Despite the drop in consolidated profit, the bank demonstrated sustained growth in its core lending activities and deposits.

Key Financial Performance

The consolidated net profit after tax (PAT) for the July-September 2025 quarter stood at ₹4,468.27 crore, a notable decrease from ₹5,044.05 crore recorded in the corresponding quarter of the previous fiscal year (Q2 FY25).

The decline in the bottom line was mainly driven by:

• Increased Provisions: Provisions and contingencies rose significantly by 43.5% Y-o-Y to ₹947 crore in Q2 FY26, compared to ₹660 crore in Q2 FY25. This increase in funds set aside for potential bad loans weighed heavily on the profit.

• Dip in Other Income: A reduction in non-interest income also contributed to the lower consolidated profit.

• Impact on Subsidiaries: The consolidated figures were also adversely impacted by the performance of subsidiaries, particularly Kotak Securities and Kotak Life Insurance.

In contrast, the standalone net profit for Kotak Mahindra Bank (the banking entity alone, excluding subsidiaries) showed a modest decline of 3% Y-o-Y to ₹3,253 crore from ₹3,344 crore in the year-ago period.

Operational Highlights

Despite the profit decline, core business indicators remained robust:

• Net Interest Income (NII): NII, the difference between interest earned and interest paid, increased by 4% Y-o-Y to ₹7,311 crore.

• Net Advances and Deposits: The bank continued to see healthy growth in its balance sheet. Net advances grew by 16% Y-o-Y to reach ₹4.62 trillion, while deposits expanded by 14% Y-o-Y to ₹5.10 trillion.

• Asset Quality: Asset quality showed improvement, with the Gross Non-Performing Assets (GNPA) ratio declining to 1.39% (down 10 basis points Y-o-Y), and the Net NPA ratio also improving to 0.32% (down 11 basis points Y-o-Y).

• Net Interest Margin (NIM): The NIM, a key profitability measure, was lower at 4.54%, a decline of 37 basis points (bps) Y-o-Y. The management attributed this compression to the effect of a repo rate cut and noted that margins are expected to see a gradual improvement in subsequent quarters as deposits are repriced.

Kotak Mahindra Bank Revenue and Profit Table (Consolidated)

Note: Figures are approximate, based on the nearest publicly reported numbers, and some may be rounded.

Conclusion

Kotak Mahindra Bank's Q2 FY26 results presented a mixed picture. The 11% drop in consolidated net profit was a significant outcome, largely driven by the conservative decision to increase provisions against potential bad loans. This increase in provisioning, coupled with a decline in other income and compression in Net Interest Margin (NIM), temporarily hurt the bank's bottom line.

However, the underlying core business health remains robust. The bank registered strong growth in net advances (16% Y-o-Y) and total deposits (14% Y-o-Y), signalling continued momentum in customer acquisition and lending activity. Furthermore, the improvement in asset quality, with both GNPA and NNPA ratios declining, suggests underlying credit health remains strong.

Moving forward, the bank's management anticipates a gradual improvement in NIMs in the coming quarters. The bank is focusing on scaling its business both organically and potentially through inorganic opportunities, as alluded to by the CEO when addressing reports of interest in acquiring IDBI Bank. Overall, while the quarter saw a dip in consolidated profit due to elevated provisions, the strong operational performance and balance sheet growth suggest a sound foundation for future growth.