Kotak Mahindra Financial institution shares fall 3% after Q2 outcomes. Must you purchase, promote or maintain?
The financial institution reported a Internet Curiosity Margin (NIM) of 4.54% for Q2FY26, with a value of funds of 4.70% throughout the identical interval. Its working revenue for Q2FY26 rose to Rs 5,268 crore, marking a 3% year-on-year enhance from Rs 5,099 crore in Q2FY25, it stated in an change submitting on October 25.
As of September 30, 2025, the financial institution’s Gross Non-Performing Property (GNPA) stood at 1.39% and Internet Non-Performing Property (NNPA) at 0.32%, enhancing from 1.49% and 0.43%, respectively, from Q2FY25. The Provision Protection Ratio was 77% as of the identical date. Beneath Basel III norms, the financial institution reported a Capital Adequacy Ratio of twenty-two.1% and a CET1 ratio of 20.9%, together with unaudited income.
What do you have to do?
Nomura maintains its Maintain name on the inventory and has a goal worth of Rs 2,200 per share, barely any upside potential from present market ranges. Nonetheless, the worldwide brokerage has raised its FY26–28F EPS estimates for the lender by 1–2%, pushed by decrease working bills and decreased credit score prices. The brokerage expects the financial institution to ship a wholesome return profile with RoA/RoE of 1.8–2% and 11–12%, respectively, over FY26–28F. The core banking enterprise at the moment trades at 2.0x FY27 BVPS — round a ten% low cost to ICICI Financial institution and HDFC Financial institution, each rated ‘Purchase’. Nomura highlighted that NIMs had been impacted by an unfavourable mortgage combine and a slower enhance within the credit-deposit ratio in contrast with friends.
Nuvama has additionally maintained a Maintain score with a revised goal worth of Rs 2,082. That’s a draw back potential of 5% from the final shut of Rs 2,192 per share. Nuvama identified that each NIM and slippage efficiency have been weaker than friends for 2 consecutive quarters. It retained its Maintain stance, citing slower enchancment in these metrics and the necessity to monitor opex progress amid intensifying competitors.
With a contrarian view, Motilal Oswal reiterated its Purchase score and assigned a worth goal of Rs 2,500 per share, an upside of 14%. The home brokerage stated that Kotak Mahindra Financial institution delivered an in-line quarter, with NII, PPoP, and PAT broadly assembly estimates. Decrease different earnings resulting from treasury losses was offset by well-managed working bills and decrease provisions. Slippages declined sequentially, whereas the Provision Protection Ratio (PCR) remained secure at 77%. NIMs had been largely in line and are anticipated to rebound, supported by deposit repricing advantages and the latest CRR minimize. The brokerage expects the unsecured lending guide, which declined throughout the quarter, to get well because the lending atmosphere improves — aiding each progress and margins. The financial institution guided for general mortgage progress at 1.5–2x nominal GDP, led by robust momentum in retail and unsecured segments. Deposit progress stays sturdy with sustained CASA traction, and the CASA ratio improved in Q2FY26, Motilal Oswal stated in its report.
Administration commentary
The financial institution expects NIMs to broaden over the following two quarters, with the next exit fee projected in 4Q, topic to macroeconomic tendencies. On the asset high quality entrance, credit score prices for bank cards are anticipated to say no step by step, whereas the microfinance (MFI) portfolio has proven enchancment and private mortgage (PL) credit score prices have decreased considerably. Nonetheless, the retail industrial automobile (CV) section continues to expertise stress, and credit score prices on this section are more likely to stay elevated within the close to time period.
Shares of the lender ended the Friday session at Rs 2,192 per share, down 1.5% from the final shut on the NSE. Kotak Financial institution shares are up 23% on a year-to-date foundation.
(Disclaimer: Suggestions, strategies, views and opinions given by the consultants are their very own. These don’t characterize the views of The Financial Occasions)
