Kotak Mahindra Bank shares fall 7% post Q1; here’s why

Shares of Kotak Mahindra Bank witnessed sharp selling on Monday, following a weaker-than-expected performance in the June quarter of the current financial year. Investor sentiment seems to have been dampened post the bank's Q1 earnings, which saw a sharp contraction in its margins and a rise in provisions. Analysts have indicated that margin pressure is likely to persist in the second quarter, as the full impact of the 50 basis points repo rate cut continues to play out.

Extending fall for the third straight session, Kotak Mahindra Bank shares declined as much as 6.95% to ₹1,977.20 on the BSE. The banking heavyweight has been under selling pressure for the past three sessions, sliding nearly 9% during the same period.

At the time of reporting, Kotak Mahindra Bank share price was trading at ₹1,980, down 6.8%, with a market capitalisation of ₹3.93 lakh crore. The counter witnessed strong volume with more than 2.2 lakh shares changing hands over the counter compared to two-week average of 1.15 lakh stocks.

Kotak Mahindra Bank shares touched its 52-week high of ₹2,301.55 on April 22, 2025, while it slipped to its 52-week low of ₹1,679.10 on November 13, 2024. The stock has delivered positive return of 10% in the past one year, while it has added nearly 5% in the last six months. In the last one month, the counter has lost over 8%.

For the first quarter ended June 30, 2025, Kotak Mahindra Bank reported a standalone net profit of ₹3,282 crore, down 7% year-on-year (YoY) from ₹3,520 crore in the same period last year. This figure excludes a one-time gain from the sale of its stake in general insurance arm, Kotak Mahindra General Insurance Company, to Zurich Insurance Company. Including the divestment gain, unadjusted net profit stood at ₹6,250 crore.

The dip in profit was largely due to higher provisioning for potential credit losses, though operational metrics remained resilient. Net interest income (NII) rose 6% YoY to ₹7,259 crore, up from ₹6,842 crore in Q1FY25, while net interest margin (NIM) stood at 4.65%.

On a consolidated basis, the bank reported a net profit of ₹4,472 crore, up 1% from the previous year, excluding the one-time gain from the divestment of Kotak General Insurance. 

Kotak Mahindra Bank’s asset quality declined marginally due to stress in MFI, retail CV, and KCC loans. Gross non-performing assets (GNPA) rose to 1.48% as of June 30, 2025, compared to 1.39% a year ago, while net NPA (NNPA) was nearly unchanged at 0.34%. The bank maintained a provision coverage ratio (PCR) of 77% during the quarter under review.

Analysts view on Kotak Bank Q1 performance

According to Emkay Global, Kotak Mahindra Bank reported weak Q1 results with an 8% miss on PAT and 1.9% return on asset (RoA), which was the lowest in the last 11 quarters due to sharp margin contraction and higher provisions.

“The management expects margin pressure to persist in 2Q as full impact of the 50bps repo rate cut sinks in, albeit to gradually stabilise and improve thereafter, as cost reduction (including SA cost) flows through,” the report noted.

ICICI Securities said that microfinance institutions (MFI) stress has peaked and bank expects credit costs to go down from next quarter. “In MFI, KMB shall wait for a few quarters and see if the stress is cyclical or structural before growing the book,” it noted.

YES Securities, in its report, noted that margins declined materially on a sequential basis. The three reasons for a sequential margin decline were the following: the impact of RBI's repo rate cut, decline in the share of unsecured retail and day count impact (which has been in the range of 7-8 bps). “Prospectively, the full impact of the repo rate cut of June will be felt in 2Q. However, the average cost of fixed rate SA will decline 75 bps to 2.5% in 2Q due to rate reduction. Also, term deposit repricing will happen over 3-4 quarters. Hence, margin will bottom out in 2Q and see improvement in 3Q and 4Q,” it said.

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