Kotak Mahindra Bank Q2 Results: Profit Rises 26%, Margin Narrows

Kotak Mahindra Bank Q2 results showed consolidated net profit rising 26% year on year to ₹5,645 crore for the July–September quarter, the private lender reported on Saturday, 24 October.

Standalone profit, the figure most closely tracked for the bank itself, climbed 29% to ₹4,212 crore from ₹3,253 crore a year earlier. That was ahead of the ₹4,104 crore expected by analysts in an LSEG poll, according to media reports.

The profit gain came with a clear squeeze on margins. Net interest margin (NIM) narrowed to 4.31% from 4.54% a year ago and 4.53% in the April–June quarter, which the bank attributed largely to its mobilisation of FCNR(B) deposits.

Kotak Mahindra Bank Q2 results: the key numbers

Net interest income, the difference between interest earned and interest paid, grew 16% to ₹8,459 crore from ₹7,311 crore. Fee and services income rose 21% to ₹2,926 crore, while operating expenses increased 14% to ₹5,271 crore.

Provisions fell 15% to ₹803 crore from ₹947 crore a year earlier, although they were higher than the ₹668 crore set aside in the June quarter. Annualised credit cost eased to 0.35% from 0.79% in the same period last year.

Asset quality improved further. Gross NPAs declined to 1.04% of advances at the end of September from 1.39% a year earlier, and net NPAs fell to 0.24% from 0.32%. Fresh slippages dropped to ₹1,230 crore from ₹1,629 crore, and the provision coverage ratio stood at 78%.

Net advances rose 25% to ₹5.77 lakh crore. Excluding loans against FCNR(B) deposits and the portfolio acquired from Kotak Mahindra Investments, loan growth was 19%. Total deposits grew 23% to ₹6.51 lakh crore.

The balance sheet remains well capitalised. Standalone capital adequacy stood at 21.9%, with a CET1 ratio of 21.4%, while standalone return on assets was 1.92% and return on equity 11.65%.

FCNR deposits reshape the balance sheet

The biggest swing factor this quarter was foreign-currency money. Kotak raised about ₹55,344 crore through FCNR(B) deposits during the quarter and lent roughly ₹16,110 crore against them through its international branches, according to Business Standard.

The inflow diluted the share of low-cost current and savings account (CASA) deposits. The CASA ratio dropped to 38.2% from 42.3% a year earlier, or 41.8% if FCNR(B) money is excluded. Without these deposits, overall deposit growth would have been 13%.

Management does not see the inflow as a lasting pattern. “We believe that the FCNR program is a one-off opportunity,” Managing Director and CEO Ashok Vaswani said on the earnings call, according to a transcript published by Investing.com.

Cost of funds rose to 4.52% from 4.46% in the June quarter, though it was lower than the 4.70% reported a year ago. Other private lenders, including IDFC First Bank, also drew in large FCNR(B) sums during the period.

The group’s subsidiaries added to earnings. Kotak Securities reported quarterly profit of ₹348 crore, the asset management and trustee business ₹287 crore, Kotak Mahindra Prime ₹251 crore and Kotak Mahindra Life Insurance ₹198 crore.

Why Kotak Bank net profit matters and what comes next

For investors, the Kotak Mahindra Bank Q2 results offer a mixed picture. Kotak Bank net profit and asset quality are moving in the right direction, but the narrower margin shows the cost of the bank’s rapid balance-sheet growth this quarter.

The bank is also heading into a leadership change. Vaswani, who has led Kotak since January 2024, said in June that he would not seek reappointment, and his term ends on 31 December 2026. The RBI has approved Anup Kumar Saha, a former MD and CEO of Bajaj Finance, as his successor from 1 January 2027.

Management indicated on the call that the full effect of the FCNR(B) inflows on net interest margin will show up in the October–December quarter. It also said about 60% of loans are linked to the repo rate, so policy rate changes reach loan pricing with a lag.

Analysts will watch how quickly Kotak puts the remaining FCNR(B) funds to work as loans, and whether margins stabilise before Saha takes charge. For more on how India’s lenders fared this earnings season, see our latest business news coverage.

Full details are in the bank’s Q2 FY27 media release.