Kotak Mahindra Bank Q1 profit rises 26% as provisions halve, credit quality stays firm

Kotak Mahindra Bank is a financial supermarket — it takes deposits, gives loans for everything from tractors to high-rises, runs a full‑service stock broker, a mutual fund, and a life insurer, all under one roof. For the quarter ended June 2026 the standalone bank reported a net profit of ₹4,123 crore, a 26% jump over the same period last year. The leap was powered by a sharp drop in provisions for bad loans and steady credit growth, even as the bank’s net interest margin softened a touch. Consolidated net profit rose 23% to ₹5,480 crore, once again underlining how the group’s diversified engines — from asset management to life insurance — help stabilise earnings.

How the core bank fared

Source: Bank’s investor presentation

Net interest income grew 9% year‑on‑year, helped by a 15% expansion in advances. Fee and services income rose 11% to ₹2,500 crore, with general banking fees (₹2,027 crore) doing the heavy lifting. Trading and mark‑to‑market income, however, swung to a loss of ₹58 crore from a gain of ₹195 crore a year ago, muting the top‑line. Employee costs were up a modest 7% despite a one‑time hit of about ₹100 crore from retiral‑benefit revaluations.

The real spark was provisions — they tumbled 45% because the bank set aside only ₹677 crore for loan losses, against ₹1,200 crore in the June 2025 quarter. Consequently, credit cost (the amount provided as a proportion of loans) more than halved, from 0.93% to 0.46%, propelling the 26% profit surge.

Net interest margin dipped 12 basis points from a year ago to 4.53%. While deposit costs remain sticky, the overall cost of funds dropped to 4.46% from 5.01% a year earlier, cushioned by a large current‑and‑savings account base (CASA ratio 40.3%). Back in October 2025, management had guided that NIM would settle in the 4.50–4.55% band for the rest of the financial year, and the latest number is squarely inside that range (cite ).

Asset quality: provisions ease, slippages remain manageable

Source: Bank’s investor presentation

Fresh slippages of ₹1,321 crore were well below the year‑ago quarter’s ₹1,812 crore, and the slippage ratio improved from 1.63% to 1.03%. The SMA‑2 book (large‑borrower loans overdue 60 days or more) ticked up to ₹249 crore from ₹194 crore in March — a minor pocket to watch — but overall asset quality remains comfortable. Net NPAs are a mere 0.27%, and the provision coverage ratio is a healthy 78%.

Diversified engines fire on all cylinders

The consolidated profit of ₹5,480 crore highlights the group’s non‑banking muscle. Kotak Securities, the broking arm, saw profit after tax jump 33% sequentially to ₹533 crore on higher trading volumes and investment income. Its cash‑market share reached 10.4% and derivative‑market share 15.9% (cite ).

The asset‑management segment — covering the mutual fund, alternate assets, and international subsidiaries — was the standout, with combined profit more than doubling quarter‑on‑quarter to ₹554 crore. Kotak Mahindra AMC & Trustee Company alone delivered a PAT of ₹399 crore, up from ₹184 crore in Q4 FY26. A big swing came from investment income (net of taxes) turning positive at ₹152 crore in Q1 FY27, compared with a loss of ₹57 crore in the previous quarter (cite ). The AMC’s monthly average equity AUM grew to ₹3.91 lakh crore, and it garnered monthly SIP inflows of ₹2,155 crore, up 21% year‑on‑year.

Kotak Mahindra Life Insurance reported a PAT of ₹336 crore, only a shade higher than a year ago, but gross written premium surged 28.4%, with group premium rocketing 55.3%. The protection business grew 31%, and the insurer launched a new cloud‑native bancassurance platform with the bank to deepen digital insurance journeys (cite ).

Even the troubled microcredit arm, BSS Sonata Microcredit, swung to a profit of ₹27 crore from a loss of ₹9 crore in Q4 FY26, suggesting the long‑drawn turnaround is starting to bear fruit (cite ).

SME and digital bets keep the loan book humming

Total advances grew 15% year‑on‑year. The star was the SME segment, expanding 20% to ₹1.26 lakh crore and now making up 24% of the loan book. Management has consistently stressed that SME growth flows from deepening existing relationships and offering a full suite of working‑capital, supply‑chain‑finance, and trade products, not from aggressive customer acquisition (cite ). That focus on a granular, largely secured book has played a key role in keeping asset quality in check.

On the deposit side, the fully digital platform Kotak811 continues to be the low‑cost acquisition engine. Its savings‑account balances now account for 12.7% of the bank’s total savings deposits, growing 32% year‑on‑year. Every month the platform adds roughly 2.98 lakh new funded accounts, providing a stable, granular deposit base that keeps the cost of funds low (cite ). The overall CASA ratio dipped to 40.3% from 43.3% in March as some high‑cost term deposits crept in, but the bank still holds one of the highest CASA ratios among large private lenders.

Management’s playbook playing out

Past calls from the bank offered clear signposts. In October 2025, the CFO guided that NIM would be range‑bound at 4.50–4.55% (cite ). At the same time, leadership emphasised a shift toward secured, relationship‑based lending and a shrinking unsecured book (cite ). Both trends are visible now. Unsecured retail advances (including microcredit) make up only 8.8% of net advances, down from 9.7% a year ago, and credit costs have eased sharply. The June quarter numbers show the bank executing exactly the playbook it had laid out — steady, profitable growth through diversification.

All figures are from the investor presentation (cite ) unless another source is cited. The stock was trading at a consolidated book value per share of ₹189 at the end of June 2026 (cite ). Note that the bank’s shares were split from a face value of ₹5 to ₹1, effective 14 January 2026, which increased the number of shares five‑fold and re‑based all per‑share metrics accordingly (cite ).

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