Detailed narrative
Kotak Mahindra Bank delivered a robust performance in Q2 FY26, marked by healthy growth across key financial metrics and a strong focus on operational efficiency. The bank reported a 15.8% year-on-year growth in net advances and a 14.6% year-on-year increase in deposits. The SME book expanded by 16% year-on-year, reaching Rs. 1.09 lakh crore. The Net Interest Margin (NIM) stood at a healthy 4.54%, with management anticipating gradual improvement over the next two quarters, assuming no further repo rate cuts. Credit costs showed a positive trend, declining sequentially from 93 basis points to 79 basis points, with expectations for a downward trajectory in MFI and credit card segments and overall moderation in the second half of the financial year.
On a standalone basis, the bank's Profit After Tax (PAT) was Rs. 3,253 crores, representing an 11% quarter-on-quarter growth when excluding the Q1 dividend from subsidiaries. The CASA ratio improved to 42.3% by the end of September 2025, driven by granular growth in average current account balances (up 14% Y-o-Y) and fixed rate savings accounts (up 8% Y-o-Y). The bank's balance sheet crossed Rs. 7 lakh crores, growing 13% Y-o-Y. Consolidated profit for Q2 FY26 was Rs. 4,468 crore, with a significant 81% contribution from the Bank and other lending entities. The consolidated book value per share grew 14% Y-o-Y to Rs. 844, reflecting strong underlying performance.
Segment-wise, consumer assets grew 16% Y-o-Y and 5% Q-o-Q, with mortgage loans (home loans and LAP) showing 18% Y-o-Y and 5% Q-o-Q growth. Secured business banking for micro and small SMEs grew 20% Y-o-Y and 8% Q-o-Q. In commercial banking, the commercial vehicle industry saw 10% Y-o-Y and 8% Q-o-Q growth, while tractor industry sales surged 31% Y-o-Y in Q2. Wholesale banking assets, including credit substitutes, grew 13% Y-o-Y and 3% Q-o-Q. The bank's subsidiaries also contributed positively, with Kotak Mutual and Trustee Company's profits growing 31% Y-o-Y and Kotak Life Insurance's individual APE new business premium increasing by 12.2% Y-o-Y, despite a Rs. 165 crore impact on KLI profits due to GST regulation changes.
Management emphasized continued investment in technology and digitization, which has led to significant operational efficiencies and cost control, with operating expenses remaining flat Y-o-Y and showing a negative 3% sequential growth. They are cautiously building back the retail unsecured business, particularly credit cards, after a period of embargo and stress normalization. While the retail CV segment continues to experience stress, the bank expects credit costs in this area to stabilize or slightly increase over the next couple of quarters. The overall outlook remains positive, with management committed to driving scale responsibly while maintaining risk prudence and profitability.