Kotak Mahindra Bank Q2 Review: Brokerages Signal Mixed Performance; Strong Loan Growth, NIM Pressure

Brokerages remain cautiously optimistic about Kotak Mahindra Bank Ltd. following its Q2 earnings, highlighting improving core trends and healthy loan growth, but flagging concerns over net interest margin (NIM) compression and elevated valuations. Jefferies and Morgan Stanley maintained their bullish stance, citing better-than-expected net interest income (NII), lower operating expenses, and improving credit quality. Investec, however, retained a ‘Hold’ rating, pointing to sharper NIM declines and limited upside due to high valuations.

Kotak Mahindra Bank Q2 Highlights (YoY)

• Net Interest Income up 4% to Rs 7,311 crore versus Rs 7,020 crore.

• Operating Profit up 3.3% to Rs 5,268 crore versus Rs 5,099 crore.

• Provisions up 43.5% to Rs 947 crore versus Rs 660 crore.

Kotak Mahindra Bank Q2 Asset Quality (QoQ)

• Gross NPA at 1.39% versus 1.48%.

• Net NPA at 0.32% versus 0.34%.

• Net profit down 2.7% to Rs 3,253 crore versus Rs 3,344 crore.

• Maintain 'Buy' and hike target price to Rs 2,650 from Rs 2,550

• Sep Qtr: Improving Core Trends

• Beat estimates with better NII & lower opex & credit cost

• Loan growth was healthy at 16% YoY & compensated for weaker-than-expected NIM

• Credit quality is improving with slippage down to 1.6%

• Trim earnings for FY26-28 by 2-3%; FY27E ROE is lower than peers at 13%

• See limited room for valuations to re-rate

• Maintain 'Overweight' with target price of Rs 2,600

• The last catalyst turns next quarter

• Liked the broad-based loan growth as well as moderation in asset quality stress

• NIM was down 11 bps QoQ as unsecured loans mix moderated

• Indeed, NIM is the only catalyst left and expect a turn starting next quarter

• Expect re-rating as earnings outperformance accelerates.

• Maintain 'Hold' and hike target price to Rs 2,335 from Rs 2,275

• In-line performance, elevated valuations limit upside

• Healthy loan growth led by low-yield segments; sharper NIM fall vs peers in H1

• Credit costs ease QoQ as MFI/CC stress moderates