Don’t Trade in the Dark—Get Your Pre-Market Report Every Day.Join Now
Search stocks
Kotak Mahindra Bank Ltd

| Q2FY26 Earnings Conference Call

NEUTRAL SENTIMENT

Report Source

⬤25th Oct 25

Summary : Kotak Mahindra Bank reported healthy Q2FY26 growth in advances and deposits, improved asset quality, and moderating credit costs, while focusing on digital transformation and cautious unsecured lending.

Management Perspective positive : Ashok Vaswani stated, "I think we have made steady progress against our overall goals and we are continuing to kind of focus strongly on execution."

Concall Report Analysis & Insights

Business Overview

  1. Net advances grew 15.8% and deposits grew 14.6% year-on-year.
  2. Net Interest Margin (NIM) is healthy at 4.54%, with expected improvement in H2FY26.
  3. Credit costs reduced to 79 bps, down 14 bps sequentially, with personal loan costs normalized.
  4. Asset quality improved; gross NPA ratio at 1.39% and net NPA at 0.32%.
  5. Consolidated profit was Rs. 4,468 crore, with 81% from Bank and lending entities.

Future Growth Prospects

  1. Expect gradual moderation in credit costs for MFI and credit cards in H2FY26.
  2. Focus on gradually building back the retail unsecured business.
  3. Anticipate post-monsoon recovery in construction equipment and tractor finance.
  4. Microfinance industry advances expected to pick up from Q3FY26.
  5. Continued investment in technology and digital platforms for efficiency and scale.

Management Insights

  1. Focused on driving scale for relevance while maintaining risk prudence and profitability.
  2. Investing heavily in technology to automate and digitize processes for efficiency gains.
  3. Excess capital provides flexibility for downturns and inorganic growth opportunities.
  4. Committed to promoting branding and marketing, with some spends postponed to Q3.
  5. Building a granular CASA franchise through new customer acquisition and existing base growth.

Signs of Skepticism

  1. Credit card portfolio declined 4% despite embargo lift, raising questions on growth momentum.
  2. OPEX growth remained low compared to peers, despite stated tech investments and marketing efforts.
  3. Subsidiary profits, particularly Kotak Prime, have been stagnant for several quarters.
  4. Unsecured loan mix has been below previous levels, with no clear timeline for increasing its share.
  5. ActivMoney balances declined quarter-on-quarter due to fund utilization.

Risk Factors

  1. Caution maintained in the retail Commercial Vehicle (CV) segment due to stress.
  2. Capital market subsidiaries saw lower volumes and profits due to market conditions.
  3. Insurance business impacted by GST regulation changes.
  4. Geopolitical uncertainties led to net outflows from FIIs in equity markets.
  5. Potential for further repo rate cuts could impact NIM.

Good To Know

  1. Repo rate cut impact has fully played out, with RBI introducing welcome industry reforms.
  2. U.S. increased tariffs on exports from India, impacting some business segments.
  3. Merger of BSS and Sonata consummated, aiming for a unified national franchise.
  4. Kotak was selected as bankers for 13 Mainboard IPOs, raising Rs. 17,900 crores.
  5. Kotak 811 app ranks as the third most downloaded banking app globally.

Key Drivers

  1. GST rate cuts boost consumption.
  2. Festive season drives demand.
  3. Digital initiatives enhance efficiency.
  4. Improved asset quality supports growth.

Key Analyst Discussions

Market Trends & Consumer Behavior

  1. Consumption was muted until mid-September, then saw strong growth due to GST cuts and festive season.
  2. Good monsoon led to pickup in rural economy demand and better rural cash flows.
  3. Commercial vehicle industry grew 10% Y-o-Y, driven by small commercial vehicle sales and GST changes.
  4. Construction equipment sales saw negative growth due to delayed infra execution and extended monsoon.
  5. Tractor industry sales grew 31% Y-o-Y due to favorable monsoon and rural cash flows.

Financial Highlights

  1. Credit card portfolio declined 4% Q-o-Q, with management expecting a lift in coming quarters.
  2. Credit costs for personal loans normalized, MFI and credit cards expected to decline.
  3. OPEX remained low due to efficiency gains, retiral benefits, and lower acquisition costs.
  4. NIM expected to gradually improve in H2FY26, assuming no further repo rate cuts.
  5. Subsidiary profits impacted by non-recurring income and marginal increase in car finance credit costs.

Product Composition

  1. Unsecured loan mix is a key focus area, with efforts to grow microfinance and credit cards.
  2. Secured business banking portfolio (micro and small SME) grew 20% Y-o-Y.
  3. Mortgage loans grew 18% Y-o-Y, with home loans as an anchor product for affluent segment.
  4. Wholesale banking assets grew 13% Y-o-Y, focusing on granular growth in SME and mid-market.
  5. Credit substitute book degrew due to better loan market pricing.

Strategic Considerations

  1. Excess capital provides flexibility for inorganic opportunities and investments in financial infrastructure.
  2. Management evaluates each investment opportunity carefully, prioritizing business needs.
  3. Waiting for final RBI guidelines on credit risk and ECL proposals before commenting on impact.
  4. Focus on digital penetration and automation to drive efficiency and scale across the bank.
  5. Strategy to serve customers through consumption-led, investment-led, and asset-led approaches.