Kotak Mahindra Bank shares plunge over 5% after muted Q1 show. Should you sell now?
shares fell 5.5% to the day's low of Rs 2,007 on BSE on Monday, July 28, following the announcement of its Q1 FY26 results. The private lender reported a 7% year-on-year decline in standalone net profit for the June quarter, at Rs 3,282 crore, down from Rs 3,520 crore a year ago.
The dip in net profit comes despite a healthy rise in the bank's net interest income (NII), which grew 6% YoY to Rs 7,259 crore in Q1FY26 from Rs 6,842 crore in Q1FY25.
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The bank clarified that the reported profit was adjusted for a one-time gain from the sale of its general insurance business. If this gain is included, the unadjusted net profit for the year-ago quarter was significantly higher at Rs 6,250 crore. This quarter's earnings also exclude any gains from the divestment of Kotak General Insurance (KGI), which ceased to be a wholly owned subsidiary on June 18, 2024. Following the divestment, KGI has become an associate of the bank.
Despite the decline in PAT, Kotak Mahindra Bank witnessed robust growth in its lending and deposit base during the quarter.
Average advances for Q1FY26 grew 14% year-on-year, with net advances rising to Rs 4,44,823 crore as of June 30, 2025, compared to Rs 3,89,957 crore a year earlier. On the deposit front, the bank reported a 13% YoY increase in average total deposits, which grew to Rs 4,91,998 crore in Q1FY26 from Rs 4,35,603 crore in the same quarter last year.
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After the bank's Q1 results, domestic brokerage firm Antique has maintained a 'Buy' rating on Kotak Mahindra Bank but has revised its target price downward to Rs 2,440 from Rs 2,540.
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Antique said that the earnings miss for the quarter was attributed to a higher-than-expected decline in margins and elevated credit costs. While loan growth was led by the corporate and secured retail segments, unsecured lending remained weak. Margins came under pressure due to rapid External Benchmark Lending Rate (EBLR) repricing and a shrinking unsecured mix.
The bank also saw a deterioration in asset quality within the microfinance (MFI) and retail commercial vehicle (CV) segments. However, a rebound in unsecured credit is expected in FY26/27, which could support future performance.
Due to margin and credit cost concerns, Antique has lowered its FY26/27 earnings estimates by 6% and 3%, respectively. Nonetheless, the brokerage finds valuations to be reasonable at 2.2 times one-year forward price-to-book, with return on assets (RoA) at 2.2% and return on equity (RoE) projected at 14% for FY26–28.
On Friday, the shares of Kotak Mahindra Bank closed
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