Kotak Bank's Q2 consolidated net profit down 11% YoY on higher provisions

The bank's net interest income (NII) rose 4 per cent Y-o-Y to ₹7,311 crore, while other income declined 4 per cent to ₹2,589 crore

Kotak Mahindra Bank on Saturday reported an 11.4 per cent year-on-year (Y-o-Y) decline in consolidated net profit in the July-September quarter (Q2FY26) at Rs 4,468.27 crore, compared to Rs 5,044.05 crore in the year-ago period, led by a dip in other income and increase in provisions.

 

On a standalone basis, which represents the banking operations, the net profit was down 3 per cent Y-o-Y to Rs 3,253 crore during Q2FY26 due to higher provisions. In Q1FY26, the bank had reported a net profit of 3,282 crore. 

 

The bank’s net interest income (NII) increased 4.15 per cent Y-o-Y to Rs 7,311 crore while other income declined 3.5 per cent Y-o-Y to Rs 2,589 crore, according to the bank’s investor presentation. 

 

Net interest margin (NIM) of the lender declined 37 basis points (bps) Y-o-Y to 4.54 per cent in Q2FY26. In the previous quarter, the bank had reported a NIM of 4.65 per cent. NIM is the measure of profitability of a lender. 

"From now on, we will see the gradual increase in the margins as the repo cut effect has been considered in Q2. As I said, as the deposit starts repricing over next two quarters, we will see gradual improvement in the margin in Q3 as well as Q4", said Ashok Vaswani, MD & CEO, Kotak Mahindra Bank.

 

Its provisions and contingencies rose 43.5 per cent Y-o-Y to Rs 947 crore in Q2FY26, compared to Rs 660 crore in the same period a year ago (Q2FY25). In the previous quarter (Q1FY26), the bank’s provisions and contingencies stood at Rs 1,208 crore. 

 

The bank reported fresh slippages of Rs 1,629 crore in Q2FY26, lower as compared to Rs 1,812 crore in Q1FY26, and Rs 1,875 crore in Q2FY25.

 

Its asset quality improved during the reporting quarter, with gross non-performing assets (NPAs) at 1.39 per cent of advances, down 9 bps from the previous quarter, and lower by 10 bps on a Y-o-Y basis. Likewise, net NPA ratio was down 2 bps sequentially and lower by 11 basis points Y-o-Y. 

 

The annualised credit cost of the bank for Q2FY26 stood at 0.79 per cent, lower as compared to 0.93 per cent for Q1FY26, though higher than 0.65 per cent in the year-ago quarter. The provision coverage ratio (or PCR) was stable at 77 per cent in Q2FY26, as compared to the previous quarter and up from 71 per cent on a Y-o-Y basis.

 

Net advances of the lender increased 16 per cent Y-o-Y and 4 per cent sequentially in Q2FY26 to reach Rs 4.62 trillion. Gross advances increased by 14 per cent Y-o-Y and 4 per cent sequentially to Rs 4.78 trillion. 

 

In the advances book, among the major segments, home loans and loans against property (LAP) grew 18 per cent Y-o-Y to Rs 1.38 trillion, consumer banking grew 16 per cent Y-o-Y to Rs 2.26 trillion, the commercial banking portfolio grew 5 per cent Y-o-Y to Rs 97,962 crore, and wholesale banking grew 17 per cent Y-o-Y to Rs 1.46 trillion, according to the presentation.

 

Deposits of the lender grew 14 per cent Y-o-Y to Rs 5.10 trillion, with current account deposits growing 14 per cent Y-o-Y, fixed rate savings account deposits growing 8 per cent Y-o-Y, and term deposits growing 20 per cent Y-o-Y. Floating rate savings account deposits, a small part of the total deposits, were down 27 per cent Y-o-Y to Rs 14,135 crore.

 

Credit-to-deposit (CD) ratio as at September 30, 2025 stood at 87.5 per cent, up from 86.7 per cent in Q1FY26. 

 

The bank’s capital adequacy ratio as at September 30, 2025, stood at 22.1 per cent, with CET1 ratio of 20.9 per cent. 

On Kotak Mahindra Bank in the race to acquire IDBI Bank, Vaswani said, at Kotak, we look at every single opportunity that comes along. 

 

"We cannot and should not be commenting upon any items which could or could not be in process. So, maybe a little premature to talk about what's happening on any of the deals that we could be looking at this point in time", he said. 

 

(Disclosure: Entities controlled by the Kotak family have a significant holding in Business Standard Pvt Ltd)