Kotak Bank Q2 profit falls 11 pc on slower core income growth; non-committal on IDBI Bank buy

Mumbai, Oct 25 (PTI) Kotak Mahindra Bank on Saturday reported an 11 per cent decline in its consolidated net profit for the September quarter to Rs 4,468 crore, pulled down by a slower growth in core income and weak performance of some subsidiaries.

On a standalone basis, the private sector lender reported a 3 per cent fall in net profit to Rs 3,253 crore for the reporting quarter.

Total consolidated income dropped to Rs 24,901.39 crore in the second quarter of FY2025-26 from Rs 26,880.02 crore in the year-ago quarter. Standalone income, however, increased to Rs 16,239 crore during the quarter under review, from Rs 15,900 crore in the same period last year.

The bank's Chief Executive and Managing Director, Ashok Vaswani, was non-committal on reports that the lender has completed due diligence to buy a majority stake in IDBI Bank, but also said it may be "premature" to discuss anything related to buying IDBI Bank or any other target.

He also did not refute or deny notions or speculation ascribing to Kotak Mahindra Bank.

"'... at Kotak, we look at every single opportunity that kind of comes along. We cannot and should not be commenting upon any items which, you know, could or could not be in process," he told reporters on a post-results conference call.

For the reporting quarter, Kotak Mahindra Bank's core net interest income grew by 4 per cent to Rs 7,311 crore, on the back of a 16 per cent loan growth but was restricted by sharp decline in the net interest margin at 4.54 per cent as against 4.91 per cent in the year ago period.

Its chief financial officer Devang Gheewalla said that the margins will expand in the second half of the fiscal, but did not give an exact target on the key number or if they will go back to the over 5 per cent level again.

He said the cost of funds is on a decline and the deposits are also getting repriced to get it down further, but it is the yield on advances -- a number not disclosed by the bank -- where it will be focusing on.

Vaswani said that, going ahead, the bank would like to grow its share of higher-yielding but riskier unsecured advances, where it had been forced to go slow over the last few quarters due to stress.

The share of the unsecured advances, which include microfinance loans, credit cards and personal loans, has fallen to just above 9 per cent and the bank will like to grow it first to double digits and then to the mid-teens, he said.

Vaswani said the only aspect where the bank is cautious right now, is the retail commercial vehicles segment, where it continues to see that the cash flows for the borrowers are not holding up leading to challenges in repayments.

From an asset quality perspective, fresh slippages came down to Rs 1,629 crore from Rs 1,875 crore in the year-ago period, and the gross non-performing assets ratio improved to 1.39 per cent as of September from 1.48 per cent in June.

Net NPAs or bad loans declined to 0.32 per cent, from 0.43 per cent at the end of the second quarter of the previous fiscal.

The CFO said slippages have reduced in credit card and MFI segments, but have gone up in the retail CV side.

The credit costs for the bank increased to 0.79 per cent from 0.65 per cent in the year-ago period, and were up to Rs 947 crore from Rs 660 crore in the year-ago period. Gheewalla explained that the accelerated provisioning because of the MFI stress started from the third quarter of FY25 onwards due to which the comparison would be stark.

The overall capital adequacy for the bank stood at a comfortable level of over 22 per cent.

Among the subsidiaries, its non-bank lender Kotak Mahindra Prime's net declined 8 per cent to Rs 246 crore, capital markets-focused brokerage arm reported a 22 per cent decline to Rs 345 crore, Kotak Mahindra Capital had its net go down by a third to Rs 60 crore and the life insurance had a steep fall of 86 per cent to Rs 49 crore.

Vaswani explained that the GST rationalisation-related troubles ahead of the cut in taxes impacted the life insurance arm's performance during the quarter.

Meanwhile, the bank announced the reappointment of C S Rajan, an independent director on its board, as a part-time chairman from January 2026 to October 21, 2027. PTI AA DP MR