Kotak Mahindra Bank Q1 FY26 Results: Higher Provisions Weigh on Profit

Kotak Mahindra Bank announced its Q1 FY26 results on July 26, reporting a standalone net profit of ₹3,282 crore. This marks a 7% year-on-year decline compared to ₹3,520 crore in the same quarter last year. However, if we include the one-time gain from the sale of its general insurance business, the net profit stood at a much higher ₹6,250 crore.

Surge in Provisions Pulls Down Profit

One of the key reasons behind the profit dip is a sharp rise in provisioning and contingencies, which more than doubled—up 109% YoY—to ₹1,208 crore. This increase in provisions significantly impacted the bottom line, as highlighted in the investor presentation.

“A 109% surge in provisions led to a noticeable dent in net profit this quarter,” the bank noted.

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NII Growth and Margins Remain Strong

On a positive note, net interest income (NII) rose by 6% year-on-year to ₹7,259 crore, showing continued strength in core lending operations. The net interest margin (NIM) also remained healthy at 4.65%, reflecting strong profitability from interest-based income.

Other Financial Metrics Show Mixed Trends

Despite steady NII growth, the cost-to-income ratio stayed elevated at 46.19%, indicating operational pressures. In addition, the return on equity (ROE) moderated to 10.94%, down from 13.91% in Q1 FY25.

“Higher operational expenses and provisioning have softened return ratios,” said analysts reviewing the results.

Asset Quality Sees Mild Deterioration

The bank’s asset quality slightly weakened, with gross non-performing assets (GNPA) rising to 1.48%, compared to 1.39% a year ago. However, net NPA (NNPA) remained stable at 0.34%, indicating controlled slippages.

CASA Ratio and Customer Assets Update

The CASA ratio—which indicates the proportion of low-cost deposits—declined to 40.9% from 43.4% in Q1 FY25, suggesting a shift in the deposit mix towards costlier funds. Meanwhile, customer assets rose to ₹4,92,972 crore, showing 13% growth, and net advances increased by 14% to ₹4,44,823 crore, indicating continued credit demand.

Kotak Mahindra Bank’s Q1 FY26 performance paints a picture of solid core banking growth, with NII and credit expansion holding strong. However, the sharp spike in provisions and decline in CASA ratio weigh on overall profitability. Going forward, how the bank manages asset quality and cost ratios will be key to sustaining margins and profitability.

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