Kotak Mahindra Bank announced its Q2FY26 results, showing mixed performance amid a challenging interest rate environment. The bank reported a steady improvement in asset quality but saw pressure on margins due to a decline in NIM. Brokerages shared varied views on the bank’s outlook, with most expecting improvement in the coming quarters driven by margin recovery and asset quality normalization.

Kotak Mahindra Bank’s Q2 results (YoY)

• Net Interest Income rose 4% to Rs 7,311 crore versus Rs 7,020 crore.
• Operating Profit increased 3.3% to Rs 5,268 crore from Rs 5,099 crore.
• Provisions surged 43.5% to Rs 947 crore versus Rs 660 crore.
• Net profit declined 2.7% to Rs 3,253 crore compared to Rs 3,344 crore.
• On the asset quality front (QoQ), Gross NPA improved to 1.39% from 1.48%, while Net NPA also improved slightly to 0.32% from 0.34%.

Here’s how leading brokerages reacted to the results:

Morgan Stanley (MS)

Rating: Overweight | Target Price: Rs 2600

Morgan Stanley liked the broad-based loan growth and moderation in asset quality stress. The firm noted that NIM was down 11bps QoQ due to a moderation in the unsecured loan mix but believes NIM is the only catalyst left and expects a turnaround starting next quarter. The brokerage expects a re-rating as earnings outperformance accelerates.

Macquarie

Rating: Neutral | Target Price: Rs 2200

Macquarie said core PPOP was in line, while the PAT miss was driven by treasury losses. Credit costs declined due to lower slippages and higher recoveries. Margin decline was in line with expectations. The management expects term deposit repricing, improving growth in unsecured segments, and the benefit of the CRR cut to improve margins in upcoming quarters.

UBS

Rating: Buy | Target Price: Rs 2450

UBS said Q2 results were broadly in line, with lower non-interest income offset by lower operating expenses. Loans are growing faster than large private peers, and CASA ratio improved by 140bps QoQ. The management expects moderation in credit costs to continue but remains cautious on the retail CV book, which is showing higher-than-normal stress. As asset quality improves, the bank plans to gradually focus on growth in unsecured loans.

Jefferies

Rating: Buy | Target Price: Rs 2650

Jefferies said Kotak reported a Q2 profit of Rs 33 billion, down 3% YoY but beating estimates due to better NII, lower opex, and reduced credit costs. Loan growth was healthy at 16% YoY, compensating for a weaker NIM (down 11bps QoQ). Credit quality improved with slippages down to 1.6%, which helped credit cost moderate to 0.9% of average loans.

CLSA

Rating: Hold | Target Price: Rs 2350

CLSA called it a mixed quarter, with PBT 3% below estimates due to treasury losses, though core PBT was 2% higher. Customer asset growth remained steady at 13% YoY, and the NIM decline was in line. Operating expenses were well controlled, beating estimates for the past few quarters. The CASA ratio stabilized after several quarters of decline, and CLSA will wait to see if this is a trend reversal. However, fee income growth remained sluggish, while credit costs were slightly higher.

Motilal Oswal (MOSL)

Rating: Buy | Target Price: Rs 2500

MOSL said the quarter was in line, with easing asset quality stress and a moderation in NIM by 11bps QoQ. Slippages declined, and management expects NIMs to rebound in the second half with a higher exit rate by Q4, depending on macro trends. Operating expenses grew below expectations, helped by lower payroll costs. Credit costs in credit cards and MFI segments are expected to decline gradually.

Nuvama

Rating: Hold | Target Price: Rs 2082

Nuvama said NIM fell more than expected, down 11bps QoQ compared to the consensus of 8bps. However, opex fell 3% QoQ and remained flat YoY, providing some offset. Slippages decreased 10% QoQ, although less than peers. Nuvama highlighted that Kotak’s NIM and slippage performance remained softer than peers for the second consecutive quarter.

BofA Securities

Rating: Buy (Upgraded) | Target Price: Rs 2700

BofA upgraded Kotak to Buy, stating that the bank is ready for a sustainable turnaround in RoA, driven by stable-to-improving NIM and normalization in asset quality. The brokerage expects Kotak to outperform the system in growth, calling it the best play on macro recovery. They see a positive risk-reward setup with both macro and bottom-up catalysts aligning well.

Overall, most brokerages maintained a positive to neutral stance on Kotak Mahindra Bank, citing improving asset quality, margin recovery prospects, and controlled operating costs as key positives. However, concerns remain around treasury losses and the slower-than-peers recovery in NIM. The stock’s target price among brokerages ranges between Rs 2082 and Rs 2700, with a consensus leaning towards a gradual recovery in performance over the next few quarters.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investors should consult with their financial advisor before making investment decisions.