Kotak Mahindra Bank Share: Biggest setback in 14 quarters, stock down -7%, know why and what next?:

News Topical, Digital Desk : If you have invested in Kotak Mahindra Bank shares or are thinking of buying this stock, then this news is very important for you. The bank has released the results for Q1FY26 (April-June 2025) and this time its Net Interest Margin (NIM) has seen a huge decline - the lowest in the last 14 quarters.

Kotak Bank's NIM
Q1FY26 NIM: 4.65% (was 5.02% a year ago) i.e. a decline of 0.37 percent YoY, and a decline of 0.32 percent QoQ i.e. on a quarter-on-quarter basis. This decline is the lowest in 14 quarters.

Net Profit: ₹3,282 crore (7% YoY decline), Provisions: ₹1,208 crore — double of last year (stress in CV and MFI sector), Loan Book: ₹4.45 lakh crore — strong growth, Deposits growth: 3% QoQ but CASA ratio fell to 40.9%

Broker houses also became cautious - Motilal Oswal said that profit was 6% less than the estimate and reduced estimates for FY26/FY27 - FY26 estimate reduced by 3.5%. FY27 estimate reduced by 1.4%. Target Price reduced to ₹ 2,400

Quarterly	NIM (%)
Mar-23	5.75
Jun-23	5.57
Sep-23	5.22
Dec-23	5.22
Mar-24	5.28
Jun-24	5.02
Sep-24	4.91
Dec-24	4.93
Mar-25	4.97
Jun-25	4.65

Reasons behind the decline- Impact of RBI's repo rate cut - There was a 50 bps cut in June, the full effect of which will now be seen in Q2FY26. Decreased share of unsecured loans - which is affecting the margin. Decline in CASA ratio - The bank is now having to raise funds with higher interest rates.

What does it mean for investors - Margin pressure may continue in the future, although the management has expressed hope of stability in Q2FY26. The increase in provisions is affecting the bank's profitability.

In terms of share valuation, the bank is now trading at around 1.9x FY27 BV - that is, the valuation is a bit expensive, until the NIM improves.

Those who are long-term investors can stay keeping in mind the bank's loan growth and sector recovery. But volatility may persist in the short term, so new investors should take a cautious decision.