Kotak Mahindra Bank Q4 FY26: profit up 13%, stock slips

Shares slide despite profit growth

Kotak Mahindra Bank shares fell as much as 5% to an intraday low of Rs 364 on the BSE on Monday, even after the lender reported higher March-quarter earnings. The reaction underscored how investors are weighing near-term growth and margin outlook against reported improvements in asset quality. The bank posted a net profit of Rs 4,026.55 crore for the March quarter of FY26, up 13.3% from Rs 3,552 crore in the same quarter a year ago. Net interest income (NII) rose 8.1% year-on-year to Rs 7,876 crore from Rs 7,284 crore. In a regulatory filing, the bank also reported an improvement in gross and net non-performing assets. The quarter included management commentary around margins and deposit strategy, which some analysts see as a key monitorable for FY27. The stock had also seen a rally in the period leading up to the results, adding sensitivity to any perceived disappointment.

Q4 FY26 numbers: what the bank reported

The lender’s net profit for Q4 FY26 came in at Rs 4,026.55 crore, reflecting a 13.3% year-on-year increase. NII rose to Rs 7,876 crore, compared with Rs 7,284 crore in the year-ago quarter. The bank said asset quality improved, with gross NPAs declining to 1.20% from 1.30% quarter-on-quarter and 1.42% year-on-year. Net NPAs eased to 0.25% from 0.31% quarter-on-quarter. Management pointed to healthy net interest margins (NIMs) at 4.67% in Q4. It also cited significantly improved credit costs at 39 basis points, compared with 63 basis points in Q3. The bank said cost-to-assets improved by 36 basis points on a year-on-year basis. It reported ROE of 12.27% for the quarter and 11.08% for the full year, measured on total net worth including the AFS reserve.

Asset quality and credit costs: incremental positives

The decline in gross and net NPAs was one of the clearer positives in the filing. Gross NPAs moved down to 1.20% in Q4 FY26, continuing an improving trend versus both the previous quarter and the year-ago period. Net NPAs fell to 0.25% from 0.31% quarter-on-quarter. Management also flagged lower credit costs, which it said improved to 39 basis points in Q4 from 63 basis points in Q3. Several brokerages referenced the decline in slippages and credit costs while assessing the quarter. The focus for investors remains whether lower credit costs are sustained alongside loan growth and funding-cost dynamics. The broader banking sector context cited in the material includes stable asset quality and healthy retail credit growth, with deposit competition remaining a pressure point.

Margins and deposit strategy in focus

NIM was reported at 4.67% for the quarter, versus 4.54% in Q3, as per management commentary. Management also noted that if the benefit from fewer number of days in Q4 is adjusted, the Q4 NIM would remain around 4.54% despite the full-quarter impact of a 25 basis points repo cut in December. Looking ahead, management guided for NIMs to remain largely flat or see a slight decline in FY27 compared to FY26. The bank said it is focusing on extending deposit tenors that are currently around 9-12 months, including by offering higher rates on longer maturities. This guidance matters because deposit repricing and competitive intensity can influence the pace of margin normalisation across private banks. Market commentary in the provided material also shows investors are tracking NIM trends closely, especially after the Q3 FY26 margin moved to 4.54% from 4.93% year-on-year.

Brokerages: targets remain above current levels

Morgan Stanley maintained an Overweight rating on Kotak Mahindra Bank with a target price of Rs 500, implying a 30% upside from current levels cited in the material. The brokerage said Q4 performance was ahead of expectations, with PAT, NII, NIM and core PPOP beating estimates, while slippages and credit costs declined sharply. Morgan Stanley expects core PPOP to deliver a CAGR of 19% over FY26-28, supported by improving profitability and balance sheet growth. It also highlighted valuations, noting the stock trading at 1.3x FY28 core P/B and 11.5x FY27 core P/E. Nomura reiterated its Buy rating with a target price of Rs 460, implying an upside of 20.1%, citing better-than-expected NIMs, controlled operating expenses and lower credit costs. Motilal Oswal reiterated Buy with a target of Rs 470 (23% upside), while Elara Capital maintained Buy but cut its target to Rs 473 from Rs 511, citing concerns around NIM pressure and lowering its target multiple to 2x from 2.3x.

Key metrics snapshot

Market context: valuation and peer comparisons

The material noted Kotak Mahindra Bank’s market value around ₹3.7-3.8 trillion and a P/E ratio range of 20x-30x, suggesting investors are pricing in high-quality earnings. It also compared NIMs with peers, citing HDFC Bank’s 3.38% for Q4 FY26 and ICICI Bank’s 4.32%. Some forecasts in the material expected Q4 FY26 NIMs around 4.9-5.1%, while other forecasts suggested a year-on-year decline to 4.49%. This spread highlights that margin expectations were a key variable into the results. Commentary also pointed to Kotak’s Return on Assets historically trailing peers, and to a more cautious stance reflected in a ‘Hold’ rating and Mojo Score of 51.0 cited in the text.

Why the stock fell: what investors appear to be pricing

The immediate stock drop, despite headline profit growth and better reported NPAs, suggests investors were focused on the trajectory of core income metrics and growth. Management’s FY27 NIM guidance of flat to slightly lower, tied to extending deposit tenors with higher rates on longer maturities, points to ongoing funding cost pressures. The material also referenced investor sensitivity after a recent run-up, where near-term pressures on NIMs and growth can trigger a consolidation phase. At the same time, multiple brokerages retained positive ratings, indicating that the debate is more about timing and valuation than balance-sheet stress. In that sense, the Q4 print delivered improvement in credit costs and asset quality, while leaving the margin path as the primary monitorable.

Conclusion

Kotak Mahindra Bank reported Q4 FY26 PAT of Rs 4,026.55 crore and NII of Rs 7,876 crore, alongside improved gross and net NPA ratios. Yet the stock fell to Rs 364 intraday as investors weighed valuation, margin guidance and deposit competition. Brokerages including Morgan Stanley, Nomura, Motilal Oswal and Elara Capital kept positive ratings with targets ranging from Rs 460 to Rs 500, even as Elara lowered its target to Rs 473 from Rs 511. The next key datapoints for the market will be how margins track management’s FY27 guidance and how funding strategy affects profitability as deposit tenors are extended.