Kotak Mahindra Bank Q2 Review: Brokerages Signal Mixed Performance; Strong Loan Growth, NIM Pressure
Jefferies and Morgan Stanley maintained bullish stance, citing better-than-expected net interest income and improving credit quality. Investec, however, retained a ‘Hold’ rating
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's net interest income or NII for the second quarter grew by 4% year-over-year, rising to Rs 7,311 crore from Rs 7,020 crore in the same period last year.
The bank's operating profit also saw a modest increase of 3.3%, reaching Rs 5,268 crore compared to Rs 5,099 crore previously. However, the bank’s provisions saw a sharp increase, jumping by 43.5% year-on-year to Rs 947 crore from Rs 660 crore.
Kotak Mahindra Bank Q2 Highlights
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.
Jefferies
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
Morgan Stanley
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.
Investec
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
