Kotak Mahindra Bank Is Still A 'Buy' For Motilal Oswal Despite Weak Q1, Revises Target Price — Here's Why

Kotak Mahindra Bank aims to increase its unsecured retail mix to 15% of the total book. Once credit filters improve, disbursements in MFI will resume. Three main reasons for NIM contraction are repo rate cuts, higher unsecured mix, and retail interest recognition based on days (Q4 usually benefits from this).

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Motilal Oswal Report

Kotak Mahindra Bank Ltd. reported a weak quarter, with net interest income broadly in line, but net interest margin contracted sharply by 32bp QoQ to 4.65%, hit by the steep policy rate cuts.

Provisions were higher than expected due to elevated slippages, leading to a 116bp QoQ decline in provision coverage ratio to 76.9%. Management expects NIM to bottom out by Q2 FY26, supported by the full transmission of rate cuts, deposit repricing, and CRR benefits, with a recovery likely from H2.

Growth in the unsecured segment is expected to pick up gradually as the lending environment improves, aiding both growth and margin trajectory.

Overall loan growth is guided at 1.5–2x nominal GDP, driven by strong momentum in retail and unsecured lending. Deposit growth remains robust, led by healthy traction in term deposits, resulting in a CD ratio of 86.7%.

We cut our earnings by 3.5%/1.4% for FY26E/27E amid NIM moderation and slightly elevated provisions.

We estimate Kotak Mahindra Bank’s RoA/RoE at 2.1%/13.4% by FY27. We reiterate our Buy rating with a revised target price of Rs 2,400 (premised on 2.4xFY27E adjusted book value, SoTP of Rs 762).

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