Kotak Mahindra Bank Q2 results preview: PAT may rise up to 32% YoY; margins, loan growth in focus

Kotak Mahindra Bank is expected to report strong year-on-year (YoY) growth in net interest income (NII) and profit after tax (PAT) in the September quarter, with investors likely to focus on net interest margins (NIMs), loan and deposit growth, operating profitability and asset quality.

The private sector lender's earnings are expected to benefit from healthy balance sheet growth and contained operating expenses, even as margins could face pressure from foreign currency non-resident (bank) deposit inflows.

Brokerage estimates point to NII growth of 11.8-15% YoY in Q2FY27, while PAT is projected to rise 27-31.9%. Motilal Oswal Financial Services (MOFSL) expects PAT to grow 31.9% YoY, while ICICI Securities and Dolat Capital project growth of 31.7% and 27%, respectively.


Operating profitability is also expected to remain strong, with pre-provision operating profit (PPoP) growth estimates ranging from 18% to 20.7%. However, the sequential trajectory of margins, credit costs and management commentary on loan and deposit growth will be key monitorables.

NII growth likely to remain strong

Brokerages expect Kotak Mahindra Bank's NII to grow 11.8-15% YoY in Q2FY27, supported by loan growth. Sequential growth estimates range from 3.1% to 6%.

MOFSL projects NII at Rs 8,330 crore, up 14% YoY. Its estimates indicate sequential growth of approximately 5%, compared with Rs 7,930 crore in Q1FY27.

ICICI Securities expects NII at Rs 8,171.8 crore, an increase of 11.8% YoY and 3.1% quarter-on-quarter (QoQ).

Dolat Capital has the highest estimate among the three brokerages at Rs 8,370 crore, representing growth of 15% YoY and 6% sequentially.

The estimates point to continued growth in interest income, although the pace of expansion varies across brokerages.

Margins likely to remain under pressure

Net interest margins are expected to be an important area of focus in Q2FY27, with brokerage estimates differing on the extent of the impact from foreign currency non-resident (bank) deposit inflows.

MOFSL expects NIMs to decline by 10 basis points QoQ to 4.43%, factoring in the impact of FCNR(B) inflows. The brokerage expects the changing funding mix to weigh on margins even as loan and deposit growth remain healthy.

ICICI Securities, in contrast, expects NIMs to remain unchanged sequentially at 4.53%, compared with 4.54% in Q2FY26 and 4.53% in Q1FY27. The divergence in estimates highlights the uncertainty around the near-term margin trajectory. Investors will look for clarity on deposit pricing, the cost of funds, lending yields and the extent to which foreign currency deposit inflows could affect funding costs.

Management commentary on the outlook for NIMs and the sustainability of margins amid balance sheet expansion will therefore be closely watched.

Loan and deposit growth in focus

Loan and deposit growth will remain key monitorables as Kotak Mahindra Bank seeks to expand its balance sheet while managing funding costs.

MOFSL expects advances to grow 7.9% QoQ in Q2FY27, while deposits are projected to rise 8.4% sequentially. The brokerage attributes the expected growth to strong FCNR(B) flows and broad-based expansion.

ICICI Securities estimates advances at Rs 5,55,225.1 crore, up 8.4% QoQ and 20% YoY. Its estimates imply an increase from Rs 5,12,249 crore in Q1FY27.

The expected expansion in advances and deposits points to healthy balance sheet growth in the September quarter. However, the contribution of FCNR(B) inflows to deposit mobilisation and their implications for funding costs will be important in assessing the sustainability of this growth.

Profit growth expected to remain healthy

Despite the potential pressure on margins, brokerage estimates point to strong growth in operating profitability and net profit in Q2FY27.

MOFSL expects Kotak Mahindra Bank to report PAT of Rs 4,290 crore, up 31.9% YoY. Its estimates indicate sequential growth of approximately 4.1%, compared with Rs 4,120 crore in Q1FY27. It projects PPoP at Rs 6,360 crore, representing growth of 20.7% YoY.

ICICI Securities projects PAT at Rs 4,284.6 crore, up 31.7% YoY and 3.9% QoQ. It estimates PPoP at Rs 6,338.1 crore, an increase of 20.3% YoY and 3.4% sequentially.

Dolat Capital expects PAT at Rs 4,120 crore, up 27% YoY and flat QoQ. It estimates PPoP at Rs 6,210 crore, representing growth of 18% YoY and 1% sequentially. The estimates indicate that operating profitability is expected to grow faster than NII on a year-on-year basis. MOFSL expects operating expense growth to remain contained, keeping the cost-to-income ratio at around 46%.

Sequential earnings trends, however, are expected to be more moderate than the year-on-year growth rates suggest. While MOFSL and ICICI Securities project modest sequential increases in PAT, Dolat Capital expects profit to remain broadly unchanged from the June quarter.

Credit costs and asset quality remain key monitorables

Asset quality is expected to remain an important area of focus, with investors likely to track credit costs, slippages and non-performing asset trends for signs of stress.

MOFSL expects credit costs to decline marginally QoQ as the seasonal impact of the first quarter wears off.

ICICI Securities expects slippages to rise 2.2% QoQ to Rs 1,350 crore in Q2FY27. However, the estimate is 17.1% lower than the level recorded in the year-ago quarter.

The expected moderation in credit costs could support earnings, although the movement in fresh slippages and provisioning requirements will remain important in assessing the bank's asset quality.

Management commentary, growth outlook in focus

Beyond the headline numbers, investors, brokerages said, will look for clarity on loan growth, deposit mobilisation, NIMs, operating expenses and provisioning trends.

The sustainability of FCNR(B) inflows, the impact of funding costs on margins and the bank's ability to contain operating expenses will be key indicators of its earnings outlook. Commentary on credit costs and the trajectory of asset quality will also be important in assessing the sustainability of profit growth.

MOFSL has retained its Buy rating on Kotak Mahindra Bank with a target price of Rs 470, compared with its cited market price of Rs 419. This implies an upside of approximately 12%. The brokerage's estimates indicate an upward revision of 1.9% to its FY27 earnings per share (EPS) estimate and a downward revision of 1.6% to its FY28 estimate.

Disclosure: This article has been written by Kumar Gaurav, who is not a Sebi-registered Research Analyst or an Investment Adviser. Gaurav and their ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective Sebi-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here