Business EconomyPosted at: Jul 18 2026 5:43PM


Kotak dismisses margin pressure concerns after 26 pc Q1 profit jump

Mumbai, July 18 (UNI) Kotak Mahindra Bank on Saturday sought to allay investor concerns over the quality of its June-quarter earnings after reporting a 26 per cent rise in standalone net profit to ₹4,123 crore, saying its net interest margins (NIM) had stabilised following the Reserve Bank of India's repo rate cycle and that earnings were driven by underlying operating strength rather than merely lower provisioning.
The bank reported a 10 per cent increase in operating profit to ₹6,131 crore, while provisions declined 45 per cent to ₹668 crore. Asset quality also improved, with gross non-performing assets (GNPA) falling to 1.18 per cent from 1.48 per cent a year earlier and net NPAs easing to 0.27 per cent.
Responding to questions from UNI during the post-results press conference on Zoom, Devang Gheewalla, Group Chief Financial Officer, Kotak Mahindra Bank dismissed concerns that the bank was sacrificing profitability to sustain loan growth, despite its loan book expanding 15 per cent year-on-year while net interest income (NII) grew at a slower 9 per cent pace.
Gheewalla said the apparent decline in NIM was largely the result of a seasonal accounting anomaly rather than any deterioration in the bank's core lending business.
"Every year, the fourth quarter carries a day-count anomaly because of the higher number of days. Adjusted for that, the Q4 NIM was actually 4.54 per cent, which is consistent with Q3 and the current quarter. There has been no real reduction in margins; they have broadly remained stable," he said.
Explaining the divergence between loan growth and NII growth, Gheewalla said the slower rise in interest income primarily reflected the impact of the earlier repo rate cycle on lending yields.
"Last year, because of the repo rate cuts, margins had declined. That process has now stabilised. The lower year-on-year growth in NII is largely a reflection of the earlier reduction in margins due to the repo rate cycle, rather than any fresh deterioration," he said.
Gheewalla also defended the quality of the bank's earnings after UNI questioned whether the sharp increase in quarterly profit was largely driven by the steep fall in provisions.
"While profit grew 26 per cent, even without the benefit of lower provisioning, operating profit increased 10 per cent year-on-year. It is not just the reduction in credit costs that contributed to the increase in profit," he said.
He added that credit costs had been declining consistently over the past several quarters, indicating sustained improvement in the bank's asset quality rather than a one-off gain.
On the bank's funding strategy, Kotak said it plans to utilise the Reserve Bank of India's FCNR(B) deposit measures to lengthen the maturity profile of its liabilities.
"Our deposit book is relatively short-tenor. FCNR deposits will help elongate the deposit profile and provide greater stability to the funding base," Gheewalla said.
He also said the bank was seriously evaluating the possibility of raising funds through overseas bond markets under the RBI's concessional swap framework, although no final decision had been taken.
"It is an opportunity we are considering very seriously, but no final decision has been made," he said.
On acquisition financing, the bank said it had adopted a policy in line with the RBI's revised guidelines and would evaluate opportunities as they emerge.
Providing an update on retail businesses, the bank said its gold loan portfolio remained relatively small but was growing at a healthy pace and continued to deliver strong profitability.
Kotak also said its credit card portfolio had returned to growth after a comprehensive overhaul of its product offerings, with expansion focused on existing affluent customers to maintain asset quality.
On workforce rationalisation, the bank said automation, digitisation and process optimisation were delivering productivity gains that would continue to shape the organisation's operating model, while employee costs rose about 7 per cent mainly due to annual increments and retirement-related expenses.
UNI BDN
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