Performance of Kotak Mahindra Bank in the 2nd Quarter FY26 — Key Financial Highlights

This article explores the financial results of Kotak Mahindra Bank for the quarter ended 30 September 2025 (Q2 FY26), assessing growth in assets, deposits and loans, analysing margin and profit metrics, and evaluating asset-quality and risk signals. We also look at the implications for the bank’s future trajectory.

Growth in Customer Assets, Deposits and Loans

Kotak Mahindra Bank (KMB) has registered strong growth in its core franchise – loans and deposits – though margin pressure and increasing provisions have tempered its headline profitability. We begin by reviewing the key figures in tabular form.

Here are the key growth metrics for Q2 FY26:
 

These numbers illustrate that KMB continues to grow its balance sheet meaningfully, both in lending and deposit mobilisation. The CASA ratio, at over 40 %, supports a relatively favourable funding mix. On the AUM side, the bank’s non‐banking assets (such as mutual funds) also contribute to the overall scale.

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Margins, Income and Profitability

While growth in assets is heartening, KMB faces challenges on the margin and profitability front. The following table summarises key operating metrics.
 

In short, albeit strong growth in loans, the bank’s profitability is under pressure mainly due to margin compression and higher provisions. The NIM decline reflects the full impact of repo-cuts and deposit re-pricing lag going through the system. As a result, despite growth in NII, the slower growth in other income and elevated expenses weigh on the bottom line.

Asset Quality and Capital Adequacy

KMB’s asset‐quality indicators remain robust, but the bank is cautious in outlook given industry challenges.

Gross NPA (GNPAs) and Net NPA (NNPAs) stand at approximately 1.39 % and 0.32 % respectively. The provision coverage ratio is at about 77 %. Credit cost is around 0.79 % annualised in Q2. On the capital front, the bank had a Capital Adequacy Ratio (CAR) of 22.8 % and a Common Equity Tier-I (CET-I) of 21.8 % on a consolidated basis.

These numbers suggest a comfortable buffer for growth and risk‐absorption, though caution is required in view of potential headwinds from unsecured loan growth and margin squeeze.

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Outlook and Strategic Implications

The bank has reiterated its strategy of expanding at 1.5-2× nominal GDP growth, with particular focus on secured retail, SME & mid‐market segments. Deposit­repricing and SA rate cuts should gradually help margins stabilise in H2 FY26. The unsecured segment (cards, personal loans, microfinance) remains selective and under watch for portfolio stress.

Key things to watch: whether deposit repricing settles, margin recovery occurs, and unsecured stress remains contained.

Conclusion

Kotak Mahindra Bank has delivered commendable growth in its loan book and deposit franchise in Q2 FY26, signalling ongoing franchise strength. Yet profitability has come under strain, primarily from margin compression and heightened provisions. 

Asset-quality numbers remain healthy and capital buffers strong, which is positive. For investors and stakeholders, the near-term focus will be on margin improvement and risk discipline in new business segments. 

If margins stabilise while growth remains healthy, the bank is well placed to rebound; but if the margin pressure persists or unsecured stress rises, the challenge could deepen.

In summary, KMB’s Q2 results reflect a strong growth engine that is currently navigating a less favourable margin environment, the coming quarters will determine how successfully it mitigates that challenge.
 

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