Don't worry, investors: Kotak Mahindra Bank allays fears on margins, says they will improve in two quarters

Kotak Mahindra Bank (KMB) on Saturday attempted to allay investor concerns over compressed margins in the September-ended quarter.

The bank's net interest margin (NIM), a key measure of the profitability of lending operations, moderated to 4.31% in Q2FY27 from 4.54% in the corresponding quarter the previous year.

It mobilised ₹55,344 crore through these deposits during the September quarter. The bank attributed the moderation largely to increased liquidity following inflows from foreign currency non-resident bank (FCNR-B) deposits.

FCNR contributed 22 bps to the margin fall

KMB’s Group chief financial officer Devang Gheewalla said: “The margins will improve going forward in the next two quarters. As we deploy these in customer –linked assets and as repricing of the repo-linked advances takes place, you will see NIMs improve,” he told the media.

“We will have flexibility to decide where to deploy,” Gheewalla said. He added that the core margins, excluding the FCNR portion, was at the same level as the previous quarter.

Earlier this week, most bank stocks fell sharply after Axis Bank, ICICI Bank and HDFC Bank had also reported a decline in margins in Q2FY27, but the commentary from the management of these banks was on similar lines. They said they were hopeful that this trend will reverse soon, hopefully starting in the next quarter itself.

KMB reported a 26.34% year-on-year increase in consolidated profit after tax, including the share of profits from associates, to ₹5,645.38 crore for the second quarter of FY27, compared with ₹4,468.27 crore in the corresponding period last year.

This is the last quarterly earnings of the bank which the current CEO Ashok Vaswani oversaw. He completes his term on December 31, 2026.

Anup Saha, the current whole time director at KMB, who heads consumer banking, marketing and data analytics, said that he was “super excited” to being at the bank and taking charge soon. Saha will take charge on January 1, 2027, after Vaswani steps down from his post.

“Our bank is the only one of its type which almost operates like a GCC model. Nearly half of the coding is being done within the bank. We will continue to build all the layers of platform and will double down on building the staock and AI solutions,” Saha said.

“I hope to spend nearly 30% of my time towards technology solutions. Technology with human touch is where banking will differentiate itself,” Saha said.

He added that KMB will focus on continuing to build private banking, mass affluent segment, digital lending and SME lending business. Saha, when asked about the current festive demand, he said: “We are watchful on that, but the overall level appears steady. We are cautious but it is still too early to assess.”

KMB’s subsidiary Kotak Mahindra Capital Company (KMCC) had one of the strongest quarters, serving as one of the book-running lead managers. It also led India’s largest IPO Jio Platforms Limited. It reported a net profit of Rs 80 crore for the Sept-ended quarter.

Vaswani disclosed that KMB would explore in having a tie up with Apple Pay. “If our customers want it, we will look at it, over the next couple of quarters.”