Kotak Mahindra Bank's net profit rose 26% YoY to Rs 4,123 crore in Q1FY27, driven by a 45% drop in provisions and a 15% loan growth. Net interest income increased 9% to Rs 7,928 crore, while asset quality saw significant improvement.

Q1 Profitability and Core Earnings

Kotak Mahindra Bank's net profit rose 26 per cent year-on-year to Rs 4,123 crore in Q1FY27, supported by lower provisions, healthy loan growth and a rise in fee income, even as a decline in net interest margin moderated the expansion in core interest earnings, the bank said in a press release on Saturday.

Net interest income (NII) increased 9 per cent to Rs 7,928 crore, while operating profit rose 10 per cent to Rs 6,131 crore, according to the bank's press release.

Lower Provisions Boost Profit

The sharp rise in profitability was primarily supported by a 45 per cent year-on-year decline in provisions to Rs 668 crore from Rs 1,208 crore in Q1FY26. The bank's annualised credit cost consequently fell to 0.46 per cent from 0.93 per cent a year earlier, providing a significant boost to the bottom line.

Business Growth and Margin Analysis

NII growth remained healthy, supported by expansion in the loan book. Net advances increased 15 per cent year-on-year to Rs 5.12 lakh crore, while customer assets rose 16 per cent to Rs 5.71 lakh crore. However, NIM declined to 4.53 per cent from 4.65 per cent in the year-ago quarter and 4.67 per cent in the previous quarter, indicating pressure on spreads despite a decline in the cost of funds to 4.46 per cent from 5.01 per cent a year earlier.

Other Income and Operating Costs

Non-interest income also supported the bank's performance, with fees and services rising 11 per cent year-on-year to Rs 2,500 crore. Operating expenses increased 8 per cent to Rs 5,135 crore, but cost-to-assets improved to 2.66 per cent from 2.83 per cent in Q1FY26, helping operating profit rise 10 per cent.

Deposit Growth and CASA Ratio

Deposit mobilisation remained robust, with period-end deposits growing 12 per cent year-on-year to Rs 5.73 lakh crore. Average total deposits rose 14 per cent, while average current deposits increased 15 per cent. However, the CASA ratio moderated to 40.3 per cent from 40.9 per cent a year earlier.

Asset Quality Improves

Asset quality improved during the quarter, with slippages declining 27 per cent to Rs 1,321 crore. Gross NPA fell to 1.18 per cent from 1.48 per cent, while net NPA declined to 0.27 per cent from 0.34 per cent. The provision coverage ratio stood at 78 per cent.

Outlook

Kotak Mahindra Bank's Q1FY27 performance reflected strong bottom-line growth driven by lower credit costs and robust business expansion, while the moderation in NIM and CASA ratio will remain key monitorables for sustaining earnings momentum.

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