Kotak Mahindra Bank on Saturday reported a 29 per cent year-on-year increase in standalone net profit to Rs 4,212 crore for the second quarter ended September 30, 2026, beating analyst expectations, and its shares rose on Monday as brokerages lifted their target prices. The country’s third-largest private lender by market capitalisation posted the profit, up from Rs 3,253 crore for the same period last year, while analysts had expected a profit of Rs 4,104 crore, according to data compiled by LSEG.
Net interest income rose 16 per cent to Rs 8,460 crore, aided by a 25 per cent rise in domestic loans. Deposits grew 23 per cent. Consolidated net profit rose 26.72 per cent to Rs 5,634 crore.
What happened
The bank reported its second-quarter results on October 24, 2026. The standalone profit increase of 29.48 per cent was driven by stronger loan demand and lower provisions for bad loans. Funds kept aside for potential bad loans and other losses fell 15 per cent to Rs 8,040 crore.
Other income, which includes income from bonds and other investments, rose 23 per cent year on year to Rs 3,194 crore amid volatile currency and debt markets. Asset quality improved marginally, with the gross non-performing asset ratio at 1.04 per cent at the end of September, compared with 1.18 per cent in the prior three months, and 1.39 per cent a year ago. Net NPAs declined to 0.24 per cent from 0.32 per cent over the same period.
There was one clear pressure point. The bank’s net interest margin, a key measure of profitability, fell to 4.31 per cent from 4.53 per cent three months earlier, on account of FCNR deposit mobilisation during the quarter. The bank mobilised around Rs 55,000 crore in foreign currency non-resident bank, or FCNR(B), deposits. Management said the funds were used to repay expensive inter-bank participation certificate borrowings and finance the acquisition of the Kotak Mahindra Investments Ltd loan portfolio, while the remaining liquidity was parked pending deployment into customer assets.
Shares react on Monday
Kotak Mahindra Bank shares rose 3.6 per cent in early trade on Monday after the results, and traded higher through the morning. The stock traded at Rs 438.40 on the NSE at 9.41 am, up 1.84 per cent after rising to Rs 446.30 in early trade from a Rs 430.50 previous close.
Brokerages maintained positive views on the lender, with JPMorgan, Motilal Oswal and JM Financial raising their target prices. JPMorgan maintained its overweight rating and raised its target price to Rs 492 from Rs 468, saying the bank delivered a strong second quarter, beating expectations on key operating metrics. It noted that rate hikes provide a strong tailwind for margins and earnings, while FCNR(B) deposits could weigh on near-term net interest margins, and said asset quality trends remain benign and the impact of the expected credit loss transition is manageable.
Motilal Oswal raised its 12-month price target to Rs 500, looking at an upside of 16 per cent from the current market price, while retaining its Buy call. It said the quarter was steady, with strong net interest income growth partly offset by higher provisioning, and that net interest margins declined 22 basis points quarter on quarter owing to surplus liquidity from FCNR(B) deposits, though they are expected to improve after deployment of that liquidity and repo rate hike transmission. Bernstein maintained its market-perform rating with a target price of Rs 500, saying strong balance-sheet growth is driving earnings per share despite margin pressure, with loan growth led by corporate and small and medium enterprise segments.
Why it matters
Indian banks experienced strong loan growth during the financial second quarter across both corporate and retail segments, with lending against foreign-currency non-resident deposits also contributing to growth. In June, the Reserve Bank of India introduced measures, including concessional hedging facilities and swap arrangements, to attract foreign currency deposits.
For Kotak, the quarter tells two stories at once. The first is growth: loans up 25 per cent, deposits up 23 per cent, other income up 23 per cent, and asset quality improving. The second is margin pressure: a net interest margin that fell because the bank took in a large amount of FCNR(B) deposits that have not yet been fully deployed into higher-yielding customer assets.
That second story is also the reason brokerages are still positive. If the parked liquidity is deployed, and if repo rate hikes are transmitted through the loan book, margins should recover. The bank itself has said about 60 per cent of its existing advances are repo linked, which means repricing should follow. Management also said the unsecured portfolio has attained stability, and the bank expects credit costs to remain well contained going ahead.
What happens next
The next test for Kotak will be whether margins recover in the coming quarters as the FCNR(B) liquidity is deployed and loan repricing takes effect. Investors will also watch whether loan growth, led by corporate and SME segments, continues at the same pace, and whether asset quality stays benign as the bank grows.
The bank has also revamped its risk underwriting models and collections capabilities over the past 24 months, which managing director and chief executive Ashok Vaswani said had paid rich dividends, with both credit costs and asset quality improving. Following a weak monsoon season this year, concerns are rising about the agriculture sector and the broader rural economy. Bank officials said they had not seen any signs of stress yet but remained watchful, as the rainfall deficiency was a cause for concern.
For now, the market has given its verdict on the quarter: a profit beat, a share price rise, and higher targets from the brokerages that cover the stock. The margin question will decide whether that verdict holds in the next quarter.
Key numbers
Standalone net profit: Rs 4,212 crore, up 29 per cent year on year, from Rs 3,253 crore.
Consolidated net profit: Rs 5,634 crore, up 26.72 per cent.
Net interest income: Rs 8,460 crore, up 16 per cent.
Domestic loans: up 25 per cent. Deposits: up 23 per cent.
Other income: Rs 3,194 crore, up 23 per cent.
Gross NPAs: 1.04 per cent, down from 1.18 per cent in the prior quarter and 1.39 per cent a year ago. Net NPAs: 0.24 per cent, down from 0.32 per cent.
Net interest margin: 4.31 per cent, down from 4.53 per cent three months earlier.
Provisions: down 15 per cent to Rs 8,040 crore.
Shares on Monday, October 26: rose to Rs 446.30 in early trade from Rs 430.50 previous close, trading at Rs 438.40 at 9.41 am, up 1.84 per cent.
Brokerage targets: JPMorgan Rs 492, overweight; Motilal Oswal Rs 500, Buy; Bernstein Rs 500, market-perform.
Timeline
June 2026: Reserve Bank of India introduces measures, including concessional hedging facilities and swap arrangements, to attract foreign currency deposits.
Quarter ended September 30, 2026: Kotak reports standalone profit of Rs 4,212 crore, net interest income of Rs 8,460 crore, loans up 25 per cent, deposits up 23 per cent.
October 24, 2026: Kotak reports its second-quarter results on Saturday.
Monday, October 26, 2026: Kotak shares rise in early trade, brokerages lift targets to Rs 492 and Rs 500.
Frequently asked questions
How much did Kotak Mahindra Bank’s profit rise in Q2? Standalone net profit rose 29 per cent year on year to Rs 4,212 crore for the quarter ended September 30, 2026, from Rs 3,253 crore a year earlier.
What drove the profit increase? Stronger loan demand, with domestic loans up 25 per cent, net interest income up 16 per cent to Rs 8,460 crore, other income up 23 per cent, and lower provisions, down 15 per cent to Rs 8,040 crore.
Why did the net interest margin fall? It fell to 4.31 per cent from 4.53 per cent three months earlier, mainly because the bank mobilised around Rs 55,000 crore in FCNR(B) deposits, with part of that liquidity still parked pending deployment into customer assets.
How did the shares react? Kotak shares rose 3.6 per cent in early trade on Monday, October 26, reaching Rs 446.30 from a Rs 430.50 previous close, and traded at Rs 438.40 at 9.41 am, up 1.84 per cent.
What are the new brokerage targets? JPMorgan raised its target to Rs 492, overweight; Motilal Oswal raised its target to Rs 500, Buy; Bernstein maintained market-perform with a target of Rs 500.
What is Kotak’s asset quality now? Gross NPAs were 1.04 per cent at the end of September, down from 1.18 per cent in the prior quarter and 1.39 per cent a year ago, with net NPAs at 0.24 per cent.
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