nvestors on Dalal Street have become aware of a difficult operating environment for private banks in the September 2025 quarter from the results declared earlier of HDFC Bank, Axis Bank and IndusInd Bank. And this was manifested with pressure on net interest margin (NIM) for leading banks and a rise in provisions on a y-o-y basis.

Kotak Mahindra Bank declared its results on Saturday afternoon, however, the stock fell 1.7% on Friday to Rs 2,186.8.

The Q2 Scorecard: Margin Squeeze and Growth Divergence

Kotak Mahindra Bank, in its results declared on Saturday afternoon, for a key operational parameter, its net interest margin (NIM) was 4.54 % in the second quarter of FY26 vis-à-vis 4.91% a year earlier.

Earlier, HDFC Bank, the largest private sector bank, had highlighted its NIM on interest earning assets was 3.4 % on total assets in the September 2025 quarter vis-à-vis 3.7% a year earlier.

And a smaller rival, IndusInd Bank had NIM of 3.32% in the September 2025 quarter vis-à-vis 4.08% a year earlier.

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The central bank had cut repo rates in its meeting in early June 2025, and while interest rates on bank loans / credit facilities have come down, interest rates on deposits with the bank come down with a lag. This had created a temporary pressure on NIMs.

Meanwhile, for another key operational parameter, credit growth, Kotak Mahindra Bank’s standalone advances grew nearly 15.8% y-o-y to Rs 4.62 lakh crore in the September 2025 quarter, and the bank has highlighted strong demand for home loans and loans against property along with consumer durable loans.

For HDFC Bank, its advances at the end of the September 2025 quarter were Rs 27.46 lakh crore, a growth of 10%. HDFC Bank’s advances to deposit ratio has been hovering well over 90% in the merged entity and it has been cautious in growing its loan book for several quarters.

And IndusInd Bank’s advances fell nearly 9% y-o-y to Rs 3.25 lakh crore at the end of the September 2025 quarter. The new MD and CEO of IndusInd Bank, Rajiv Anand, in a press release has highlighted that they are being cautious on microfinance disbursement. Anand has assumed office in late August 2025.

IndusInd Bank under the earlier senior management had faced several accounting problems and it is understood to be under very strict supervision by the central bank.

The Bottom Line Battle: How Provisions Shaped Profits (and Losses)

Kotak Mahindra Bank has made provisions of Rs 947.4 crore in the September 2025 quarter, a rise of nearly 43.5% on a y-o-y basis. A rise in provisions for Kotak Mahindra Bank is understood to be related to provisions on applicable Alternate Investments Funds (AIF) Investments pursuant to various RBI circulars.

Its % of net NPA to net advances was 0.32 % in the September 2025 quarter vis-à-vis 0.43 % a year earlier. However, higher provisioning resulted in Kotak Mahindra Bank’s standalone net profit declining nearly 2.7 % y-o-y to Rs 3,253.3 crore in the September 2025 quarter.

HDFC Bank had also made provisioning to the tune of Rs 3,500 crore in the September 2025 quarter vis-à-vis Rs 2,700 crore a year earlier. HDFC Bank in its investor presentation had pointed out to floating and general provisions it has made in the September 2025 quarter, to explain the above.

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Its % of net NPAs to net advances was 0.42% in the September 2025 quarter vis-à-vis 0.41% a year earlier. Higher provisioning resulted in HDFC Bank’s standalone net profit rising only 10.8% y-o-y to Rs 18,641.3 crore in the second quarter of FY 26.

And IndusInd has also seen a sharp jump in its provisions – it was Rs 2,622.38 crore in the September 2025 quarter vis-à-vis Rs 1,820 crore a year earlier. Its net NPA was 1.04% in the second quarter of FY26 vis-à-vis 0.64 % a year earlier.

The sharp jump in provisions had resulted in IndusInd Bank reporting a standalone net loss of Rs 444.8 crore in the September 2025 quarter vis-à-vis a net profit of Rs 1,325.5 crore a year earlier.

Efficiency Kings: HDFC & Kotak Lead on RoA

Kotak Mahindra Bank’s return on average assets was 0.47% in the September 2025 quarter, and on annualizing it would be nearly 1.88 % for FY26.

And HDFC Bank’s return on assets (average) – not annualized was 0.49% in the September 2025 quarter, and on annualizing for FY26 it would be nearly 1.96%.

However, IndusInd Bank’s return on assets (annualized) was negative 0.33% in the September 2025 quarter.

Growth outlook

Investors will be closely monitoring the growth strategy of Rajiv Anand, MD and CEO of IndusInd Bank, for the next quarters, with the bank expected to emerge stronger from the earlier accounting problems it had faced.

The RBI has taken several steps over the past few months to boost lending in the broader banking system. Investors will continue to monitor leading banks, Kotak Mahindra Bank, HDFC Bank and IndusInd Bank, amongst others, in their ability to grow their loans books and at the same time manage their NIMs. And the ability of banks to acquire low-cost deposits and grow their loan books via their pan India branch network remains key.

In addition, investors will be monitoring the provisioning requirements of leading banks over the next few quarters.

Valuations

Kotak Mahindra Bank trades at a P/E of more than 30 times estimated standalone FY26 earnings, while HDFC Bank trades at a P/E of nearly 20 times estimated standalone FY26 earnings.

IndusInd Bank trades at a P/E of more than 50 times its estimated standalone FY26 earnings.

Clearly, bank stocks have priced in the near term growth opportunities.

Amriteshwar Mathur is a financial journalist with over 20 years of experience.

Disclosure: The writer and his family have no shareholding in any of the stocks mentioned in the article.

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