Kotak Mahindra Bank Shares Fall 3.5% Despite Q1 Profit Beat; Brokerages Remain Bullish

Shares of Kotak Mahindra Bank fell as much as 3.5% in early trade on Monday as investors reacted to the private lender's June-quarter earnings, with margin compression overshadowing a stronger-than-expected profit performance.

The stock dropped to an intraday low of ₹376.10 before recovering some losses to trade at ₹382.30, down 2%, at around 2:10 p.m.

Kotak Mahindra Bank reported a 25.6% year-on-year rise in standalone net profit to ₹4,123 crore, aided by lower provisions and credit costs.

The lender's credit cost nearly halved to 0.46%, while provisions declined 45%, supporting profitability during the quarter.

However, net interest income (NII) rose 9.2% to ₹7,928 crore, slightly below Street expectations of ₹8,058 crore. Net interest margin (NIM) contracted to 4.53%, down 14 basis points sequentially and 12 basis points year-on-year, broadly in line with analysts' estimates.

Asset quality remained stable, with the gross non-performing asset (GNPA) ratio improving to 1.18% from 1.20% in March, while the net NPA ratio stood at 0.27%, compared with 0.25% in the previous quarter.

The bank's net advances grew 15% year-on-year, while deposits increased 12%, indicating loan growth continued to outpace deposit mobilisation.

Brokerages Remain Positive

Despite the stock's decline, brokerages maintained a constructive stance on Kotak Mahindra Bank.

Bernstein retained its 'Market Perform' rating with a target price of ₹500, implying an upside of around 28% from Friday's closing price.

The brokerage said the bank delivered a steady quarter with broad-based loan growth and stable asset quality, although margin trends remained under pressure. It added that deposit growth lagged peers, loan growth was no longer significantly outpacing rivals and capital levels remained elevated, even as lower credit costs and cost discipline supported earnings.

Jefferies reiterated its 'Buy' rating with a target price of ₹460, implying an upside of around 18%.

The brokerage said standalone profit exceeded expectations due to stronger fee income and lower credit costs. It also noted that asset quality continued to improve, particularly in the microfinance and credit card portfolios, and raised its FY27 earnings estimates by 2% to reflect better fee income and operating expenses. According to Jefferies, clarity on the bank's next chief executive officer remains an important catalyst, while valuations continue to appear reasonable.

Morgan Stanley said Kotak Mahindra Bank's NIM was in line with expectations and that the lender's overall June-quarter performance was better than its forecasts.