WHEN KOTAK MAHINDRA BANK’S (KMB) MD and CEO Ashok Vaswani announced in June that he would not seek a re-appointment after his first term ends on December 31, 2026, it marked the bank’s second leadership transition in just over three years. And in line with the uncertainty that followed founder Uday Kotak’s exit, Vaswani also leaves with several of the bank’s longer-term challenges still unresolved.

An industry veteran with leadership roles at Citigroup, Barclays and fintech Pagaya Technologies, Vaswani took charge on January 1, 2024, after KMB veteran Dipak Gupta served as interim CEO for four months following Uday Kotak’s earlier-than-scheduled exit in September 2023. Following Vaswani’s decision, the bank has initiated the process of appointing a new MD and CEO, and the bigger question is, what kind of institution will the new CEO inherit?

Over the past three to four years, the bank has struggled to build its liability franchise at the pace required to support stronger loan growth. It has weighed on lending volumes, margins, and returns. Return on equity (RoE) has remained range-bound and declined to 11.3% in 2026, from 15.29% in 2022.

Beyond the quarterly financials, there was a growing perception that some structural issues had begun emerging towards the end of Uday Kotak’s tenure. The market’s subdued response to the bank’s performance over the past few years suggests investors were looking for deeper operational changes than a leadership transition alone could deliver.

Total shareholder return (TSR) has remained volatile through both leadership changes. Month-on-month TSR stood at -6.4% on August 31, 2023, a day before Uday Kotak’s resignation became effective. When Vaswani assumed office, TSR was at -4.38% on January 31, 2024. It stood at -5.06% on July 22.

The bank’s top management — past and present — will not concede that leadership changes have had an impact on growth, margins, operating efficiencies, and shareholder return. But KMB remains the only major Indian private sector bank that still carries the family name of its promoter. While it operates across investment banking, asset management, insurance, alternate assets, brokerage and research, it continues to lag the “Big Three” — HDFC Bank, ICICI Bank, and Axis Bank — in scaling its core banking activity. KMB officials were unavailable for comment.

CAUTIOUSLY OPTIMISTIC

The management’s commentary during the Q1FY27 earnings call on July 18 reflected this reality. While maintaining optimism on personal and unsecured business loans, executives remained cautious on advances growth and margins.

Earlier that day, KMB reported a 26% year-on-year increase in net profit to ₹4,123 crore in Q1FY27, from ₹3,282 crore a year earlier. Net interest income (NII) rose 9% to ₹7,928 crore from ₹7,259 crore. Net interest margin (NIM), however, moderated to 4.53% from 4.65% a year ago and 4.67% in the preceding quarter. The loan book also reflected flattish growth. Personal loans, unsecured business lending and consumer durables financing increased only 5% YoY to ₹25,589 crore.

The management acknowledged it remained cautious on unsecured business lending due to SME-related concerns. Unsecured retail advances, including microcredit, accounted for 8.8% of net advances in June 2026, against 9.7% a year earlier and 11.8% in the March 2024 quarter, when Vaswani had just taken over.

“The organic loan book growth on the personal loans side is expected to grow faster... we could see double-digit-plus growth,” said Anup Kumar Saha, whole-time director and head of retail banking.

“We were cautious in business loans due to supply chain disruptions. But we will grow where we get opportunities... Analysts should not think of quarter-on-quarter growth; think of it over a long period of time,” Vaswani told analysts during the earnings call.

Margins continued to remain an area of concern. NIMs have largely stayed in the 4.5-4.6% range since the September 2025 quarter. Group CFO Devang Gheewalla described margins as “consistent” but declined to provide forward guidance, saying several variables would determine future outcomes.

Vaswani reiterated that the bank would prioritise “secure, profitable and responsible” asset growth rather than chase volumes. “We will not grow for the sake of growth, focus on high-RoE businesses and credit perspective,” he said.

BUILDING FOR SCALE

One of Vaswani’s strategic initiatives has been selective acquisitions.

On June 30, KMB announced the acquisition of Deutsche Bank’s retail banking, affluent private banking and wealth management business in India for ₹282 crore.

Although analysts viewed the acquisition as relatively small, Vaswani argued it made strategic sense because Deutsche Bank’s affluent and SME customer base complemented Kotak’s own franchise.

“The price which we paid will be RoE accretive to us. The transaction closes in September 2027 so the contours of the transaction will be known then.”

Nitin Aggarwal and Dixit Sankharva, analysts, Motilal Oswal Financial Services, describe the quarter (Q1FY27) as steady, highlighting controlled slippages, contained credit costs, and stable margins. “KMB’s NIM is expected to inch up with a gradual pick-up in unsecured and commercial asset classes... While advances growth remained steady, corporate lending picked up, with the bank taking advantage of better spreads and volatility in treasury markets.”

The brokerage has raised its FY27 and FY28 earnings estimates by around 2% and projects RoA and RoE of 2.05% and 12.6%, respectively, for FY27.

“KMB is a very conservative bank, which moves in a shell with the first signs of asset quality concerns,” says Dhananjay Sinha, CEO and co-head, equities and head of research, Systematix Group. “The bank’s focus is on growing in a balanced manner, with stress on both advances as well as deposits growth.”

Vaswani’s mandate was not only to assemble a leadership team outside Uday Kotak’s shadow but also to build scale which would take KMB closer to its nearest rival Axis Bank, in terms of asset size.

In his message to shareholders in the FY26 annual report, Vaswani acknowledged the same. “While our primary focus remains on organic growth, we will continue to pursue inorganic opportunities that enhance scale, capabilities, or customer reach, as evidenced by our recent acquisition of Deutsche Bank’s retail portfolio.”

The Deutsche Bank acquisition, along with the earlier purchase of Standard Chartered Bank India’s personal loan portfolio for ₹3,330 crore, will strengthen KMB’s retail franchise. But both transactions are incremental.

THE ROAD AHEAD

With only two quarters before Vaswani steps down, investor attention is now on who will succeed him.

“The board and the NRC (Nomination and Remuneration Committee) is committed that the job gets done in the right timeline,” Vaswani told analysts.

Among internal candidates, Anup Kumar Saha, who had earlier built Bajaj Finance’s consumer finance business, and whole-time director Paritosh Kashyap are emerging as possible contenders.

“To be fair to Vaswani, he was parachuted in from the outside in a very tough period. He inherited legacy issues from Uday Kotak’s regime. It would obviously take time for Vaswani to settle into a challenging role,” Hemindra Hazari, an independent research analyst, tells Fortune India.

The next CEO will need to tackle several issues. “The successor will need to build the liabilities side of the bank,” says a banking analyst on condition of anonymity. “To be fair, it is an industry problem, but it needs attention. The second issue will be to ensure that attrition at the bank does not increase.” It improved to 32.5% in FY26, from 39.6% in FY24.

Ultimately, the next CEO’s success may be judged less on repairing what went wrong during Vaswani’s tenure and more on addressing legacy issues.