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  1. Home
  2. Reports Kotak Mahindra Bank:Q1FY26 Result update
382.65 1.05 (0.28%)

Kotak Mahindra Bank:Q1FY26 Result update
29-07-2025

*AFS reserve: AFS stands for Available-for-Sale. Banks like Kotak invest in bonds and shares. These investments can go up or down in value over time. The AFS Reserve is a place in the bank’s balance sheet where these unrealized gains or losses (changes in value that haven’t been sold yet) are recorded.

  • Higher credit cost and provisions: Provisions and credit costs remained elevated due to continued stress in the Microfinance (MFI) segment, which the bank has indicated will persist through Q1 and Q2 of FY26.
    • The credit cost in the MFI segment is believed to have peaked, and moderation is expected in the upcoming quarters.
    • Additionally, the bank is witnessing early signs of stress in the retail commercial vehicle (CV) segment and is closely monitoring developments in this area.
    • The MFI segment constitutes only 2% of the overall loan portfolio, while the total CV/Construction Equipment (CE) segment accounts for 10%. However, the specific contribution of the retail CV/CE portfolio has not been disclosed.
    • The management is also keeping a close watch on the smaller SME segment, although the entire SME portfolio is fully secured.
  • Profitability: PAT declined by 47% year-on-year (Y-o-Y) in Q1FY26. However, Q1FY25 included an exceptional gain from the sale of a 70% stake in the bank’s insurance business. Excluding this one-time item, the PAT registered a decline of 7% Y-o-Y in Q1FY26.
  • NIM compressions: The NIM has compressed due to the ongoing rate cut cycle but is expected to stabilize in the coming quarters.
    • Asset re-price faster than deposits. The bank has reduced savings account interest rates by ~75 basis points, and the benefit of this move is expected to reflect in the upcoming quarters, contributing to NIM stabilization.
  • Other developments:
    • The personal loan portfolio has now stabilized, and growth from this segment is expected to resume going forward.
    • The embargo on the credit card business has been lifted, and while ramp-up takes time post-embargo, growth is anticipated in the coming quarters. The bank has also launched 2 to 3 new products, which are expected to support expansion in this segment.
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382.65 1.05 (0.28%)
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