Kotak Mahindra Bank has enjoyed one of the best operational parameters in the domestic banking sector — loan growth, net interest margin (NIM) and quality of assets, amongst others.
Investors on Dalal Street were keen awaiting Kotak Mahindra Bank’s operational performance in the December 2025 quarter, given the monetary loosening cycle of the RBI.
Let’s dig in and find out.
Q3 Operational Metrics: Growth vs. Margins
Operational performance of Kotak Mahindra Bank and HDFC Bank in December 2025 quarter
| NIM (%) | Loan growth (%) | Net profit growth (%) | |
| Kotak Mahindra Bank | 4.5% | 16.2% | 4% |
| HDFC Bank | 3.5% | 12% | 11.5% |
Kotak Mahindra Bank’s net interest margin (NIM) was 4.5% in the December 2025 quarter vis-a-vis 4.9% a year earlier.
While Kotak’s NIM contracted in Q3FY26, it remains superior to larger private sector banks and PSU banks.
Advances grew 16.2% y-o-y to Rs 4.8 lakh crore in Q3FY26, and that was owing to strong growth in personal loans, loans for consumer durables and business banking assets.
Retail loans like loans for consumer durables and loans to smaller enterprises enable banks to earn a higher rate of interest on loans / credit vis-a-vis loans to top rated corporates and help them manage the pressure on NIMs.
The RBI has taken several steps to boost lending in the broader banking system and this includes the cut in repo rates in early December 2025. This in turn has put a temporary pressure on NIMs of banks.
Earlier, the largest private sector bank, HDFC Bank’s net interest margin (NIM) was 3.5% based on interest earnings assets in the December 2025 quarter vis-a-vis 3.6% a year earlier.
Its advances were Rs 28.21 lakh crore at the end of Q3FY26, a growth of 12% y-o-y. HDFC Bank, since its merger, has been quite cautious in growing its loan book, given its loan-to-deposit ratio is well above 90%.
HDFC Bank in its investor presentation has highlighted its retail loans grew 6.9%, small and mid-market enterprises loans grew by 17.2%, business banking grew 19.8%, and corporate and other wholesale loans grew by 10.3% in Q3FY26.
Strong asset quality
Asset quality of these two leading private sector banks has been strong, like earlier quarters. They have one of the lowest NPA ratios in the domestic banking industry and set benchmarks for other banks.
For Kotak Mahindra Bank, its % of net NPA to net advances, was 0.31% in the December 2025 quarter vis-a-vis 0.4% a year earlier.
Its provisions and contingencies were Rs 809.6 crore in the December 2025 quarter vis-a-vis Rs 794.1 crore a year earlier.
Kotak Mahindra Bank’s provision coverage ratio of 76% in Q3FY26 vis-a-vis 77% a year earlier, and is above regulatory requirements.
The bank has also highlighted a one-time hit of Rs 95.5 crore in Q3FY26 related to the new Labour code, and as a result, its standalone net profit grew just 4% y-o-y to Rs 3,446.1 crore in the quarter under review.
Kotak Mahindra Bank’s core banking operations are reflected in its standalone results.
Earlier, HDFC Bank highlighted its % of net NPAs to net advances was 0.42% in the December 2025 quarter vis-a-vis 0.46%.
Its provisions had also come down by nearly 10% y-o-y to Rs 2,837 crore in the December 2025 quarter, and it helped HDFC Bank’s standalone net profit rise 11.5% y-o-y to Rs 18,635.8 crore in the quarter under review.
Efficiency kings – Return on Assets (RoA)
Kotak Mahindra Bank and HDFC Bank enjoyed identical return on assets (RoA) in the third quarter of FY26.
The return on average assets (not annualised) was 0.48% in the December 2025 quarter for both banks, and on annualising it for FY26 it would be nearly 1.92%.
HDFC Bank and Kotak Mahindra Bank have had one of the highest RoA in the banking industry, over the past several quarters.
Growth outlook and valuations
Valuation comparison
| Standalone P/E | Price to (standalone) book value | |
| Kotak Mahindra Bank | 31.4 | 3.4 |
| HDFC Bank | 19.3 | 2.6 |
Kotak Mahindra Bank has got approval from its board to raise up to Rs 15,000 crore during FY27 via unsecured, redeemable, non-convertible debentures, on a private placement basis.
The RBI had also on Friday announced a plan to inject Rs 2 lakh crore in the banking system via different instruments and in phases. The above measure should give a further boost to lending in the broader banking system and also help lower the cost of loans / credit.
Investors will be closely monitoring Kotak Mahindra Bank, HDFC Bank and other leading banks to grow their loan book over the next few quarters as well as manage the pressure on NIMs and other key operational parameters.
The Kotak Mahindra Bank stock ended down 0.9% on Friday to Rs 422.2, and hovering not too far from its 52-week high of Rs 460.3 that was reached on 22 April, 2025. Sentiment for the stock has been partly strong on account of the recent stock split.
Valuation Review: The Premium Persists
Kotak Mahindra Bank trades at a standalone P/E of 31.4., On the preferred valuation matrix, price to (standalone) book value, it trades at 3.4 times. Over the past 5 years, Kotak Mahindra Bank has traded at a price to (standalone) book value between 3.1 times and 7.1 times.
HDFC Bank trades at a standalone P/E of 19.3 times.
It trades at a price to (standalone) book value of nearly 2.6 times. Over the past 5 years, the HDFC Bank stock has traded at a price to (standalone) book value between 2.1 times and 4.8 times.
The stock price of Kotak Mahindra Bank appears to have factored in the growth opportunities over the next few quarters.
Amriteshwar Mathur is a financial journalist with over 20 years of experience.
The writer and his family have no shareholding in any of the stocks mentioned in the article.
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