Kotak Mahindra Bank's shares down 6%: Here we decode why
What's the story
Stocks of Kotak Mahindra Bank have witnessed a sharp decline, falling as much as 6% in early trade today. The fall comes after the bank's Q1 results for FY26 were released, showing a 7% year-on-year decline in standalone net profit. The profit fell to ₹3,282 crore from ₹3,520 crore in the same quarter last year, raising investor concerns.
Financial performance
NII grows but provisions spike hits profit
Despite the drop in profit, Kotak Mahindra Bank's net interest income (NII) grew by a healthy 6% YoY to ₹7,259 crore from ₹6,842 crore in Q1 FY25. However, this was offset by a sharp 109% YoY spike in provisions and contingencies at ₹1,208 crore. The bank's net interest margin (NIM) remained strong at 4.65% but contracted by 32 basis points QoQ due to lower lending rates and higher contribution from the low-yielding corporate book.
Market response
Asset quality deteriorates
Kotak Mahindra Bank's asset quality deteriorated in the quarter, with slippages surging to 1.9% due to stress in micro-finance institutions (MFI), retail commercial vehicles (CV), and the Kisan Credit Card (KCC) loans. However, the credit growth was healthy at 14% YoY. Brokerage firms have responded cautiously to the bank's performance. Nomura maintained a 'Neutral' rating with a target price of ₹2,150, while Morgan Stanley retained an 'Overweight' rating with a target of ₹2,600.
Stock performance
Motilal Oswal expects NIM to hit bottom in Q2 FY26
At 11:27am, Kotak Mahindra Bank's shares were trading at ₹1,994.10 on the NSE, down 6.14%. Motilal Oswal has reiterated a 'Buy' rating but cut its target to ₹2,400. The brokerage expects the NIM to hit bottom in Q2 FY26 before recovering due to full rate transmission impact and deposit repricing benefits.