The share price of Kotak Mahindra Bank is down over 3% in early trade on January 27 after brokerage reports on the bank’s December quarter flagged pressure on net interest margins and operating profitability, even as loan growth and asset quality trends remained stable. Brokerages, including Motilal Oswal, Nomura, Jefferies and Nuvama Institutional Equities, said earnings were broadly in line or marginally below expectations, with flat margins and higher operating expenses weighing on performance, while lower credit costs and steady growth provided support.
Jefferies on Kotak Mahindra Bank: ‘Buy’
Jefferies has maintained a ‘Buy’ rating on Kotak Mahindra Bank with a target price of ₹530, implying an upside of about 26% from the price cited in its January 25 report. In its analysis titled “Dec Qtr: Leads on Loan Growth, Lags on NII Growth”, Jefferies said the bank’s standalone December quarter profit, excluding one-off costs, rose 6% year-on-year and was ahead of estimates, while loan growth of 16% and deposit growth of 15% were higher than peers including HDFC Bank and ICICI Bank.
At the same time, Jefferies noted that net interest income growth of 5% lagged peers due to weaker margin performance, leading it to describe the quarter as “on par with peers.” The brokerage also pointed out that asset quality is stabilising, which has led to lower credit costs, and added that management commentary on a potential IDBI Bank transaction suggested a lower probability of a deal, stating that the bank “evaluates transactions but doesn’t want distractions.” Jefferies said it has tweaked its estimates and continues to stay at Buy.
Motilal Oswal on Kotak Mahindra Bank: ‘Buy’
Motilal Oswal has maintained a ‘Buy’ rating on Kotak Mahindra Bank with a target price of Rs 500, implying an upside of about 18% from recent levels. In its January 27 report, Motilal Oswal said the bank posted “in-line earnings; healthy, broad-based growth” during the third quarter of FY26. The brokerage noted that standalone profit came in at Rs 3,450 crore, broadly meeting expectations, while net interest income grew 5.1% year-on-year and 3.5% quarter-on-quarter.
Net interest margins remained flat at 4.54% on a sequential basis, which the firm attributed partly to “short-term funds deployed in treasuries.” Loan growth stood at 16.1% year-on-year, driven by housing loans, business banking, SME, and corporate segments, while deposits rose 14.6% year-on-year.
Motilal Oswal also pointed out that fresh slippages declined marginally and gross non-performing assets fell to 1.3%, with the brokerage stating, “Slippages largely flat QoQ; NIMs to improve in 4Q and stabilize in 1Q,” while reiterating its positive view on the stock.
Nomura on Kotak Mahindra Bank: ‘Neutral’
Nomura has retained a ‘Neutral’ rating on Kotak Mahindra Bank and raised its target price to Rs 460, implying an upside of about 9% from the last closing price cited in its report. In its January 26 note, Nomura said the bank’s quarterly profit of Rs 3,450 crore was “4% below our estimate, driven by higher opex from the New Labour Code and flat NIMs.”
The brokerage highlighted that margins stayed flat at 4.54% against its expectation of an improvement, while higher operating expenses led to a miss at the core pre-provision operating profit level. At the same time, Nomura acknowledged that asset quality trends improved, with credit costs declining 15 basis points quarter-on-quarter to 69 basis points, supported by lower slippages and stronger recoveries.
The report said, “Q3 demonstrated Kotak Mahindra Bank’s ability to contain credit cost in a seasonally weak quarter along with strong delivery on growth,” adding that loan and deposit growth of 16% and 15% year-on-year, respectively, was the strongest among large private banks. Despite this, Nomura noted limited upside due to return ratios and said the stock trades at a premium to peers with higher return profiles.
Nuvama Institutional Equities on Kotak Mahindra Bank
Nuvama Institutional Equities, in its daily result update, said Kotak Mahindra Bank’s December quarter performance saw a “miss on NIM and slippage,” even though credit costs were better than expected. The brokerage noted that profit after tax marginally missed consensus estimates, as net interest margins stayed flat quarter-on-quarter versus expectations of improvement.
Nuvama also said slippages declined only 1.5% sequentially, compared with its estimate of a sharper fall, while credit cost declined to 69 basis points from 88 basis points in the previous quarter. According to the report, “Core PPOP was flat QoQ and grew 4% YoY,” indicating limited operating leverage during the quarter despite stable asset quality indicators.
Conclusion
Brokerage reports on Kotak Mahindra Bank point to a clear pattern emerging from the December quarter numbers. Growth in loans and deposits remains steady, and asset quality continues to improve with lower credit costs and stable non-performing asset ratios. At the same time, flat margins and higher operating expenses have limited profit expansion, leading to mixed reactions from analysts. While Motilal Oswal remains positive with a Buy call, Nomura and Nuvama have flagged margin pressure and operating trends as areas to track in the coming quarters.