Profitability Overview
During Q2FY26, Kotak Mahindra Bank's net profit experienced a decline, dropping by 2.7% to Rs 3,253 crore. This decrease marks a change from the previous
year's performance. However, amidst this decline, the bank still demonstrated growth in several key financial areas. These contrasting outcomes necessitate a closer examination of the various factors influencing the bank's financial health, which includes aspects beyond just the profit figures. The fall in profit could be influenced by various operational costs, market conditions, or strategic investments made during the quarter. Analyzing the bank's operational strategies and the economic environment will provide a deeper understanding of the profit decline and the overall financial stability of Kotak Mahindra Bank.
Deposit Growth Surge
A significant increase in deposits was observed during the second quarter of FY26. Total average deposits expanded by 14% year-over-year, reaching Rs 5.11 lakh crore from Rs 4.46 lakh crore in Q2FY25. This surge in deposits indicates growing customer confidence in the bank. Average current deposits also experienced a parallel rise, increasing by 14% year-on-year to Rs 70,220 crore from Rs 61,853 crore. Such substantial growth in deposits can be linked to various factors. These could include the bank's effective marketing strategies, competitive interest rates, and the expansion of its customer base. The ability to attract and retain deposits is crucial for a bank's financial stability, enabling it to fund its lending activities and maintain liquidity. The increase in deposits demonstrates Kotak Mahindra Bank's success in managing its customer relationships and market position.
Assets Under Management
Kotak Mahindra Bank's total Assets Under Management (AUM) saw a notable increase during the period under review. As of September 30, 2025, the AUM reached Rs 7,60,598 crore, reflecting a 12% year-on-year growth from Rs 6,80,838 crore a year earlier. Furthermore, the domestic mutual fund equity AUM experienced a substantial rise of 14% year-on-year, reaching Rs 3,62,694 crore. These figures reflect the bank's robust expansion and successful management of its assets. The growth in AUM demonstrates the bank's effectiveness in attracting investments and managing existing assets, highlighting the bank's position in the financial market. The growth in both overall AUM and domestic mutual fund equity AUM signifies the trust investors place in Kotak Mahindra Bank's investment strategies and its ability to generate returns.
Advances and Lending
Net advances showed considerable growth during the second quarter of FY26. The net advances grew by 16% year-on-year, reaching Rs 4.63 lakh crore as of September 30, 2025, compared to Rs 3.99 lakh crore a year earlier. This increase indicates a surge in lending activity by the bank, which could be attributed to various factors, including an increase in loan applications and favorable market conditions. The bank's willingness to extend credit is a key indicator of its confidence in the economic outlook and its ability to manage risk effectively. The rise in net advances will likely have a positive impact on the bank's revenue generation as it earns interest income on these loans. The growth in lending activities signals the bank's continued efforts to support economic growth and its strategic alignment with market demands.
Improved Asset Quality
A critical highlight of Kotak Mahindra Bank's Q2FY26 performance was the improvement in its asset quality. Gross Non-Performing Assets (GNPA) stood at 1.39% as of September 30, 2025, which is a decline from 1.49% in the previous year. Similarly, Net NPA decreased to 0.32% from 0.43% in the prior year. The Provision Coverage Ratio was recorded at 77%. The improvements in asset quality reflect the bank's successful risk management strategies, its effective loan recovery practices, and its ability to mitigate potential losses. Lower NPA levels are vital for a bank's financial health, as they minimize the need for provisioning and increase the bank's profitability. A higher Provision Coverage Ratio further enhances the bank's ability to absorb potential losses. This shows the bank's dedication to maintaining a strong and resilient balance sheet.
NII and NIM Analysis
Net Interest Income (NII) at Kotak Mahindra Bank increased by 4% year-on-year to Rs 7,311 crore from Rs 7,020 crore in Q2FY25. This growth in NII highlights the bank's capacity to generate revenue from its core lending and borrowing activities. Despite the growth in NII, the Net Interest Margin (NIM) for the quarter stood at 4.54%, indicating a slight variation in the bank's profitability from its interest-earning assets. The cost of funds came in at 4.70%, which is another crucial metric, reflecting the expenses associated with the funds the bank uses for lending and investment. Analyzing NII and NIM provides important insights into the efficiency of the bank's financial operations and its ability to manage interest rate risks. The trends in these metrics can indicate the bank's strategic decisions and its overall financial performance.
