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Kotak Mahindra Bank Limited — Q3 FY26 earnings call

Call held 24 Jan 2026

Management summary

Kotak Mahindra Bank delivered a strong Q3 FY26, marked by robust advances and deposit growth, healthy NIMs, and significant improvement in asset quality with credit costs falling to 63 bps. The bank's diversified business model, including strong subsidiary performance, contributed to a 10% YoY consolidated PAT growth. While global and sector-specific liquidity challenges persist, management expressed confidence in continued responsible growth and further credit cost normalization.

Highlights

Net advances grew 16% Y-o-Y, in line with the bank's philosophy of 1.5x to 2x nominal GDP growth.
Average deposits grew 15% Y-o-Y, supported by healthy growth in low-cost deposits (CA and fixed rates SA both growing 15%).
Net Interest Margin (NIM) remained healthy at 4.54%, with an adjusted NIM of 4.58% excluding short-term treasury deployments.
Credit costs showed significant improvement, reducing to 63 basis points in Q3 from 93 bps in Q1, driven by improving unsecured business delinquencies.
Subsidiaries contributed 30% of consolidated profits, growing 11% Y-o-Y and 19% sequentially, demonstrating resilience and depth of the conglomerate model.
Asset quality parameters improved, with Gross NPA at 1.30% (vs 1.39% in Q2) and Net NPA at 0.31% (vs 0.32% in Q2), with a provision coverage ratio of 76%.

Concerns

Global landscape remains volatile with geopolitical tensions, trade/tariff uncertainties, and FII outflows impacting investor confidence.
Pressure on low-cost deposits and enhanced volatility in banking sector liquidity persist.
Retail Commercial Vehicle (CV) segment continues to show some stress, requiring cautious observation and tightened underwriting.
Construction Equipment industry sales saw negative growth of -14% Y-o-Y in Q3 and -10% YTD December due to slower infrastructure activity and project execution challenges.
Lower collections efficiency in Tractor Finance due to impact on farmers' cash flows from extended monsoons and soft Agri-commodity prices.

Key financials

2 periods

Headline

Net Advances Growth
16%
YoY +16%
Average Deposits Growth
15%
YoY +15%
CASA Ratio
41.3%
Net Interest Margin (NIM)
4.5%
QoQ 0%
PAT (Bank Standalone)
₹3,400 Cr
QoQ +8%
PAT (Consolidated)
₹4,900 Cr
YoY +10%
Gross NPA
1.3%
QoQ -6.5%
Net NPA
0.31%
QoQ -3.1%
Provision Coverage Ratio
76%
Slippage Ratio
1.3%
QoQ -5%
ROE (Bank Standalone)
10.7%
ROE (Consolidated)
11.4%
ROA (Consolidated)
2.1%
Cost to Income Ratio (excl. one-off)
47.4%

Q3

Credit Cost
63 bps
QoQ -20.3%

What they filed

Q1 FY27: revenue up 6.4%, net profit up 22.5% against the same quarter last year.

₹ Cr · quarterly

Line item	Q2 FY25	Q3 FY25	Q4 FY25	Q1 FY26	Q2 FY26	Q3 FY26	Q4 FY26	Q1 FY27
Revenue	16,427	16,633	16,772	17,248	17,199 +5%	17,507 +5%	17,827 +6%	18,355 +6%
Expenses	13,094	10,596	13,666	13,123	11,606	13,933	13,656	14,857
Other income	10,453	7,313	10,402	9,456	7,703	10,344	10,648	11,714
Interest	7,139	7,170	7,157	7,527	7,333	7,384	7,376	7,703
Depreciation	0	0	0	0	0	0	0	0
Profit before tax	6,647	6,180	6,351	6,053	5,963 −10%	6,533 +6%	7,443 +17%	7,509 +24%
Tax rate	25%	25%	23%	27%	25%	25%	27%	27%
Net profit	5,044	4,701	4,933	4,472	4,468 −11%	4,924 +5%	5,423 +10%	5,480 +23%
EPS	5.07	4.73	4.96	4.50	4.49	4.95	5.45	5.51

How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SME Book
₹1.16L Cr Total Book Value17% Growth
Tractor Finance
16% Growth5% Growth
Mortgage Assets
18% Growth5% Growth
Secured Business Banking
21% Growth5% Growth
Agri SME Book
12% Growth8% Growth
Wholesale Banking Assets (incl. Credit Substitutes)
17% Growth3% Growth
Subsidiaries
₹1,453 Cr Profit11% Profit Growth19% Profit Growth
Kotak Mahindra Prime (Auto Finance)
15% PAT Growth₹43,244 Cr Customer Assets13% Customer Assets Growth
Kotak Securities
13.5% Market Share14% Market Share (MTF Business)
Kotak AMC and Trustee Companies
31% Growth22% Growth₹5.87L Cr Domestic MF AUM20% Domestic MF AUM Growth
Life Insurance
18.7% Individual Annual Premium Equivalent Growth75% Retail Sum Assured Growth₹1.00L Cr AUM14% AUM Growth2.3× Solvency Ratio

Capital allocation

high confidence

Liquidity Liquidity disclosed Bank standalone capital adequacy is very healthy at 22.6%, of which CET1 itself is 21.5%. Group capital adequacy continues to remain strong at 23.3%, with CET-1 at 22.4%. Life insurance solvency ratio is 2.3x against regulatory requirement of 1.5x.

At the Bank standalone level, capital adequacy is very healthy at 22.6%, of which CET1 itself is 21.5%. Our capital adequacy continues to remain strong at group level at 23.3%, with CET-1 is 22.4%. Kotak Life continues to maintain a solvency ratio of 2.3x as against the regulatory requirements of 1.5x.

Guidance & targets

Credit Cost

Credit Cost Normalization Credit Cost · ongoing · Medium confidence continue to normalize at a more moderated pace

Overall, we expect normalization of credit costs to continue, though at a more moderated pace.

— Ashok Vaswani
Credit Cost Trajectory Credit Cost · Q4 and Q1 (next FY) · Medium confidence further gradually go down

But clearly, even in Q4, we expect the credit cost to further gradually go down and the trend continuing during Q1.

— Devang Gheewalla

NIM

NIM Trajectory NIM · Q4 · Medium confidence moderate increase

So, assuming no further rate cuts in February, I think we will see a moderate increase in Q4 NIM, as I explained.

— Devang Gheewalla
NIM Stability NIM · from Q1 (next FY) · Medium confidence more realistic and stable NIM

But I think more realistic and stable NIM is something which we will be able to sort of estimate going forward from Q1, once the aberrations are also removed and we have a clearer picture.

— Devang Gheewalla

Cost of Funds

Term Deposit Repricing Completion Cost of Funds · by Q1 of the next year · High confidence completed

we expect the repricing to get completed by Q1 of the next year.

— Devang Gheewalla

Cost-to-Asset Ratio

Cost-to-Asset Ratio Cost-to-Asset Ratio · ongoing · Medium confidence 2.5-2.6%

I think we would like to obviously maintain cost-to-asset ratio in the range of 2.5-2.6.

— Devang Gheewalla

PL Portfolio

Acquired PL Portfolio Run-down PL Portfolio · over the next 2 quarters · High confidence less than INR 1,500 crores, will run down

It is less than INR 1,500 crores approximately. It is about 20% of what it was. So, I think it will run down over the next 2 quarters in that sense.

— Devang Gheewalla

Fee Income

Fee Income Growth Fee Income · quarter-on-quarter · Medium confidence keep growing

we just like to keep growing on that, hopefully on a quarter-on-quarter basis.

— Jaideep Hansraj

What to watch in Q4 FY26

NIM Trajectory

Q4 FY26 and Q1 FY27

Current 4.54% (Q3 FY26)

Target Moderate increase in Q4, more realistic and stable from Q1 FY27

Why it matters

To confirm the expected improvement in NIM after accounting for short-term liquidity effects and deposit repricing.

So, assuming no further rate cuts in February, I think we will see a moderate increase in Q4 NIM, as I explained. But I think more realistic and stable NIM is something which we will be able to sort of estimate going forward from Q1, once the aberrations are also removed and we have a clearer picture.

Risks & concerns

Global Volatility and FII Outflows
medium

Geopolitical tensions, trade/tariff uncertainties, and FII outflows from India due to perceived attractiveness of other markets.

Management acknowledged
Banking Sector Liquidity and Deposit Pressure
medium

Enhanced volatility in banking sector liquidity and pressure on low-cost deposits due to flows into commodities and capital markets.

Management acknowledged
Stress in Retail Commercial Vehicle (CV) Segment
medium

Continued stress in the Retail CV segment, leading to tightened underwriting and reduced disbursements, though delinquencies are showing improvement.

Management acknowledged
Slowdown in Construction Equipment Sales
medium

Negative growth of -14% YoY in Q3 due to slower infrastructure activity, project execution challenges, and tight state government cash flows.

Management acknowledged
Lower Collections Efficiency in Tractor Finance
medium

Impact on farmers' cash flows from extended monsoons and soft Agri-commodity prices led to slightly lower collections efficiency.

Management acknowledged
Impact of New Labor Code Provisions
low

Q3 included INR 96 crores pre-tax for new labor code-related provisions, impacting reported PAT.

Management acknowledged

Q&A highlights

8 direct

NIM outlook and factors affecting it Direct

So, assuming no further rate cuts in February, I think we will see a moderate increase in Q4 NIM, as I explained. But I think more realistic and stable NIM is something which we will be able to sort of estimate going forward from Q1, once the aberrations are also removed and we have a clearer picture.

Analyst questioned the flat NIM despite prior guidance for improvement; management explained the impact of repo rate cuts, CRR benefits, short-term liquidity deployment, and provided a forward outlook for Q4 and Q1 FY27.

Asked by Kunal Shah

Credit cost trajectory and steady-state levels Direct

But clearly, even in Q4, we expect the credit cost to further gradually go down and the trend continuing during Q1.

Analyst sought clarity on the sustainability of falling credit costs and the expected steady-state, with management confirming continued improvement driven by unsecured business and cautious approach to Retail CV.

Asked by Kunal Shah

Stickiness and granularity of current and savings account deposits Direct

Our current account is primarily, if you look at, there is a lot amount of activity around the granularity in the market also. And we have been able to capitalize on in terms of the opportunity which is being thrown out there in the market as far as acquisition of more of what you call as private labelled companies, proprietary, and things like that.

Analyst inquired about the drivers of CA growth and institutional SA rundowns, leading to management's explanation of focus on granular retail and SME segments, and strategic run-down of MIBOR-linked SA.

Asked by Rikin Shah

Completion of term deposit repricing and cost of funds outlook Direct

I think the term deposit rates obviously have sort of reduced over quarter-on-quarter. But I think as I indicated, getting into Q4, clearly there is some tightening and hardening of the rate, which may take place. In terms of the residual sort of repricing, I explained the cost. If I look at the cost of fund benefit itself, which used to be about 32 bps in Q2, further reduced to 16 bps in Q3. It's further, obviously as the repricing starts completing, it will further go down. So, clearly with the average term deposit, which is between 9 months to 12 months, and if you look at roughly the repricing started towards middle of Q1, we expect the repricing to get completed by Q1 of the next year.

Analyst sought clarity on the remaining repricing cycle for term deposits, with management providing a clear timeline for completion by Q1 next year and noting current hardening of rates.

Asked by Rikin Shah

Strategy for credit card growth and acquisition costs Direct

Having said that, we want to be cautious. We obviously don't want to grow very aggressively and then get into credit problems. And as you would have seen, Q3, generally speaking, has been a very muted quarter for credit cards across the industry. So, we will see in the first instance, we will see spend on the cards go up as we ramp up acquisition. And then we will see ANR build over a period of time.

Analyst questioned the bank's cautious approach to credit card issuances compared to peers, prompting management to explain their strategy of responsible growth with revamped products and a focus on quality over aggressive expansion.

Asked by Abhishek Murarka

Sustainability of cost growth and cost-to-asset ratio Direct

I think we would like to obviously maintain cost-to-asset ratio in the range of 2.5-2.6.

Analyst probed on the long-term cost growth trajectory and operating leverage, with management clarifying that acquisition costs are 'good costs' and fixed costs are controlled, aiming to maintain the cost-to-asset ratio.

Asked by Abhishek Murarka

Impact of draft ECL circular on credit costs Direct

However, considering even the draft circular, the impact of the ECL provision is less than 2% post-tax for us in the Bank. So, it is not likely to materially impact even if you were to apply the draft circular as is.

Analyst asked about the potential impact of the new ECL framework, and management provided a quantitative assessment, indicating a non-material impact on the bank's financials.

Asked by Marukh Adajania

Strategic rationale for potential M&A (IDBI deal) Direct

The first criteria we look at is, is this particular transaction going to add to us strategically, right? If the transaction adds to us strategically, then of course, we go to the next stage. If it doesn't add strategically, it kind of goes away. Then we look at valuation and say, what is the valuation on this particular transaction and is it value-accretive for the firm? ... And the third lens that we put to it is really the lens of saying, what is it going to take to really integrate this kind of acquisition, right.

Analyst inquired about the bank's strategy regarding the IDBI deal, leading management to articulate their three-pronged framework for evaluating any M&A opportunity: strategic fit, valuation, and integration feasibility.

Asked by Suraj Das

3 min read 6 chapters

Detailed narrative

Overall Financial Performance and Growth Drivers

Kotak Mahindra Bank reported a strong Q3 FY26, with net advances growing 16% Y-o-Y and average deposits increasing 15% Y-o-Y, maintaining a healthy CASA ratio of 41.3%. The bank's standalone PAT stood at INR 3,400 crores, growing 8% Q-o-Q (adjusted for one-off labor code provisions), while consolidated PAT reached INR 4,900 crores, up 10% Y-o-Y. This growth was supported by consistent quarterly advances growth of approximately 4% over the last three quarters and a healthy Net Interest Margin (NIM) of 4.54%, which would have been 4.58% excluding short-term treasury deployments.

Asset Quality Improvement and Credit Cost Reduction

Asset quality parameters showed significant improvement, with Gross NPA reducing to 1.30% from 1.39% in Q2, and Net NPA improving to 0.31% from 0.32%. The provision coverage ratio remained strong at 76%. Credit costs saw a substantial reduction to 63 basis points in Q3, down from 79 bps in Q2 and 93 bps in Q1, primarily driven by improving delinquencies in unsecured retail businesses. Management expects this normalization trend to continue, with credit costs gradually declining further in Q4 and Q1 FY27, though at a more moderated pace.

Deposit Franchise and Cost of Funds

The bank's deposit franchise demonstrated robust growth, with average current account balances growing 14% Y-o-Y and average fixed rate savings balances growing 12% Y-o-Y. The focus on granular CASA growth, including the 811 offering and self-employed segments, contributed to this performance. The cost of funds reduced by 16 bps in Q3 to 4.54%, continuing a downward trajectory from 5.01% in Q1 and 4.70% in Q2. Management anticipates the repricing of term deposits to be largely complete by Q1 of the next financial year, contributing to further cost of fund benefits.

Consumer Assets and Credit Cards Strategy

The consumer asset portfolio grew 16% Y-o-Y and 4% sequentially, led by strong momentum in MSME. Mortgage loans, including home loans and loan against property, registered healthy growth of 18% Y-o-Y and 5% Q-o-Q. While the acquired Personal Loan portfolio from Standard Chartered is running down quicker than expected, the organic personal loan business continues to be a main driver. The bank has revamped its credit card proposition, with the Solitaire card gaining traction in the High Net Worth segment, and plans to ramp up acquisition cautiously to ensure quality growth.

Commercial and Wholesale Banking Performance

The Commercial Bank saw the CV industry sales grow 22% Y-o-Y and 21% Q-o-Q, though the bank remains cautious on the Retail CV segment due to ongoing stress. The Agri SME book grew 12% Y-o-Y and 8% Q-o-Q, driven by a pivoted strategy around Agri-clusters. Wholesale Banking Assets, including Credit Substitutes, grew 17% Y-o-Y and 3% Q-o-Q, with Corporate SME advances growing 26% Y-o-Y and 7% Q-o-Q. Investment Banking had a strong quarter, managing 11 IPOs and 3 QIPs, raising INR 74,000 crores, and advising on 5 transactions worth INR 26,000 crores.

Subsidiary Contributions and Group Synergies

Subsidiaries played a significant role, contributing 30% of consolidated profits, with a Y-o-Y growth of 11% and sequential growth of 19%. Kotak Mahindra Prime (auto finance) delivered 15% Y-o-Y PAT growth, with customer assets growing 13% to INR 43,244 crores. Kotak AMC and Trustee companies saw AUM growth of 31% Y-o-Y, and the life insurance business reported 18.7% Y-o-Y growth in individual annual premium equivalent. The group emphasizes its comprehensive financial conglomerate model, leveraging cross-sell opportunities and maintaining strong capital adequacy at 23.3%.

This is an AI-generated summary of a publicly available earnings call transcript.

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