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Informist, Saturday, May 2, 2026

 

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--Kotak Bk: Q4 margins affected due to slower growth in corporate loan book 
--CONTEXT: Kotak Bank mgmt's comments in post-earnings call with analysts 
--Kotak Bank: Below-normal forecast of monsoon for 2026 adds to uncertainty 
--Kotak Bk: Monitoring second-order impact of geopolitical situation, El Nino 
--Kotak Bank: At its core, we are an SME bank 
--Kotak Bk: See NIMs falling next year, but decline will be more gradual 
--Kotak Bk: Not seeing any stress from West Asia crisis right now 
--Kotak Bank: Expect term deposit rates to rise in Oct-Mar 
--Kotak Bank: Panchkula case being investigated, not right to say anything now 
--Kotak Bank: Stress on credit costs seen between Q1-Q3 FY26 behind us

 

By Anshul Choudhary and Durgesh Nandan

 

MUMBAI – Kotak Mahindra Bank's net interest margin is likely to fall more in the financial year 2026-27 (Apr-Mar), but the fall is likely to be lower than in FY26, the bank's management told analysts in a conference call after announcing the March quarter earnings. The bank's net interest margin has declined annually for three years now with the FY26 margin down 36 basis points to 4.60%.

 

The bank's margin is likely to fall as the management plans to raise term deposit rates in the second half of FY27. However, the fall in margin is expected to be lower than the decline reported in FY26 as the bank's focus on growing current accounts and savings accounts should offset the impact of higher term deposit rates, Devang Gheewalla, chief financial officer, said on the call. Current and savings accounts comprise 40% of the bank's deposits while term deposits account for the remaining 60%.

 

"If you have seen the TD (term deposit) rates which we are increasing are for the longer duration. So the effect of the increase in the TD rates in the cost of funds and then impacting NIM will be gradual," Gheewalla said. "In the current year, the NIM drop was close to 36 bps, so we expect NIM will be reducing next year, but the rate of reduction will be much lesser, and far more gradual."

 

The bank has been struggling to increase margins but the management said things are likely to improve from here. The bank's net interest margin for the March quarter was 4.67%, which was better than 4.54% a quarter ago but still down from 4.97% a year ago. Slower growth in the corporate loan book affected margins, the management said.

 

The management was hopeful of growing its credit card business again. "The (credit card) portfolio has been fully restacked through launches such as Solitaire, Air+, and Cashback+, delivering segment-specific value proposition. Solitaire continues to scale in the HNI (high networth individual) segment, while Air+ and Cashback+ are gaining traction in emerging and mass segment, reinforcing the right product to right customer," it said.

 

The bank expects credit costs to improve further as business gains traction. "The kind of stress we saw in the credit cost line during the first three quarters of the year is effectively behind us," the management said. It iterated its focus on small business for growth, despite facing challenges in the past, and said its core was still small and medium enterprises.

 

"We feel very good about where we are from a credit cost perspective on our unsecured book now. We are back in the microfinance business, we are back to growing cards, and back in the business of growing personal loans... delinquencies on these kind of portfolios... (are) in the acceptable range," it said.

 

The management claimed no stress is currently visible in the credit business even after the outbreak of war between the US and Iran. However, it acknowledged that the war is a risk and could have a second-order impact on the Indian economy. The management was also worried about stress from rural areas due to expectations of a below-normal monsoon forecast for 2026 which may affect income levels of farmers. 

 

The management did not share any new information on questions about the Panchkula case, in which bank officials were found to be involved in siphoning off funds of the municipal corporation of Panchkula, Haryana. "...the matter is currently being investigated by a law enforcement agency. Therefore, it would not be appropriate to say anything at this stage," the management said.

 

Kotak Mahindra Bank reported its earnings for the March quarter Saturday. Its net profit was INR 40.27 billion, up over 13% on year, beating analysts' expectations. Its net interest income rose 8% on year to INR 78.76 billion, slightly higher than expectations. Thursday, shares of the bank ended slightly lower at INR 383.30 on the National Stock Exchange. Equity markets were closed Friday for Maharashtra Day.  End

 

Edited by Rajeev Pai

 

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