Kotak Mahindra Bank Q2 FY27 Earnings Call: PAT Jumps 26% YoY, FCNR(B) Raise Totals Rs. 55,344 Cr (KOTAKBANK)

Kotak Mahindra Bank Ltd held its Q2 FY27 earnings call on October 24, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Strong PAT Growth, Margin Dip on FCNR(B) Mobilization

• Group PAT of Rs.5,645 crore, +26% YoY / +3% QoQ — standalone bank PAT of Rs.4,212 crore (+29% YoY); standalone PBT of Rs.5,579 crore (+29% YoY, +2% QoQ) on NII growth of 16% YoY and non-interest income growth of 23% YoY.
• NIM at 4.31%, down 22 bps QoQ — 15 bps of the decline from FCNR(B) deposits/related advances, remainder from day-count variation and IBPC repayment; core margin broadly flat vs Q1 FY 2026-2027. Management declined formal margin guidance but said margins "should be significantly different" once repo transmission plays out (~3 months to breathe through the book).
• Asset quality improved — GNPA at 1.04% (vs 1.18% in Q1 FY 2026-2027), NNPA at 0.24%, PCR above 78%, slippage ratio 0.85% vs 1.03% QoQ; credit cost improved to 35 bps from 46 bps in Q1 FY 2026-2027 (vs 0.79% in Q2 FY 2025-2026).
• ROA at 1.92% (+4 bps YoY) on ~26% average balance sheet growth; stated ROA 11.65% for Q2 FY 2026-2027, ROE 12.55% adjusted for the non-cash AFS reserve; capital adequacy 21.9% with CET1 at 21.4%.
• Cost-to-income at 45.2%, down 160 bps YoY — opex +14% YoY / +3% QoQ (+11% YoY and flat QoQ excluding one-time international-borrowing costs); cost-to-assets improved to 2.4% from 2.67% in Q2 FY 2025-2026.
• Net worth of Rs.1,45,984 crore at 30 September — includes Rs.10,958 crore of MTM gains in the AFS reserve not routed through P&L; consolidated book value per share at Rs.196, +6% QoQ and +16% YoY.

One-Off Funding Opportunity and a Regulatory Wind-Down

• US$5.78 billion (Rs.55,344 crore) raised under FCNR(B) — equal to 9.7% of the June (Q1 FY 2026-2027) deposit base and significantly ahead of what deposit market share would imply; management views it as a one-off opportunity adding longer-duration, fixed-rate funding.
• Deployment so far: Rs.16,100 crore lent (~3.1% of 30 June net advances) — funding the Rs.8,900 crore AMIL loan acquisition and Rs.9,800 crore net IBPC repayment; remaining undeployed liquidity to be deployed "over the next few quarters" (Q3 FY 2026-2027 onward) to take advantage of the rate cycle, in addition to core-deposit-funded growth.
• Rs.9,600 crore of KMIL loans assigned to the bank — a regulatory requirement (RBI circular prohibiting the same business in multiple legal entities); the transferred book is less than 2% of total bank loans, and management characterized the KMIL contribution to NII growth as "minimalistic." Citi's Kunal Shah estimated core sequential NII growth at ~4% vs 6.7% reported including KMIL.
• ~3% spread on the KMIL book now accrues in the bank — from Q2 FY 2026-2027 onwards; management stressed it is a pure assignment of loans between entities with customer contracts unchanged. Consolidated provisioning is higher post-transfer: real estate standard asset provision of 1% at the bank vs 0.4% at KMIL.
• KMIL will not be an operating entity going forward — all loans and people transferred to the bank, which now services the loans; KMIL is repaying its liabilities, with residual capital to be dealt with over a period of time (no specific timeline given).
• NIM pickup expected from Q3 FY 2026-2027 onwards — driven by full-quarter FCNR(B) impact, deployment of excess liquidity into customer assets, and repo-rate transmission on the floating-rate book starting October 2026; transmission only partial in Q3 FY 2026-2027, with full impact in Q4 FY 2026-2027.

25% Advances Growth; Measured Unsecured Rebuild

• Net advances grew 25% YoY / 13% QoQ — excluding international-branch FCNR(B) loans and the KMIL acquired portfolio, core growth was 19% YoY / 8% QoQ, led by SME (ECLGS-supported), corporate and retail; management reiterated the aim of 1.5–2x nominal GDP loan growth with no restriction on liquidity or capital.
• Unsecured book added Rs.1,730 crore in Q2 FY 2026-2027 vs Rs.707 crore in Q1 — unsecured retail share at 8.1%; growth across MFI, credit cards, personal and business loans. Axis Capital's Jayant Karote flagged the ~Rs.1,000 crore personal loan surge and questioned run-rate sustainability, noting similar movements in Q3 and Q4 FY 2025-2026 before a flattish Q1 FY 2026-2027.
• Personal loan volatility explained by Stan C portfolio run-down — the inorganic portfolio acquired in FY 2025-2026 is now largely off with very little remaining; management indicated the ~Rs.1,700-1,800 crore unsecured run rate should be steady going forward but attached no explicit period token to that continuation.
• Microcredit being done with a 100% guarantee — Head of Retail Banking Anup said Kotak's relative unsecured market share is very small, the bank will not rush growth after the recent crisis, and unsecured should not be used as a customer acquisition tool; cherry-picking from existing deposit customers via internal data and low-friction digital journeys.
• Credit cards accreted ~Rs.500 crore in each of Q1 and Q2 FY 2026-2027 — +8.9% YoY / +8.3% QoQ as of September 2026, attributed to the "Solitaire" product; new unsecured products (mass-affluent term loans, affluent overdrafts) remain nascent and did not meaningfully contribute to Q2 FY 2026-2027 growth.
• CV/CE growth kept measured in Q1 FY 2026-2027 — considering the impact of war; over the last couple of quarters default rates have come down and collection efficiency is improving, with substantial investment in collection infrastructure.
• El Niño watch — tractor loan collections improved significantly with no visible delinquency impact as of Q2 FY 2026-2027, but management remains watchful of El Niño-related risk given the ~13% rainfall deficit in the current monsoon season.

Broad-Based Traction Across Retail, Corporate and SME

• Deposits grew 23% YoY / 14% QoQ (end-of-period) — average deposits +19% YoY / +8% QoQ; CASA (ex-FCNRB) at 41.8% vs 40.3% at 30 June; high-cost CDs repaid; cost of funds at 4.52%, which management says remains among the lowest among large peers.
• Corporate bank loan book grew 25% YoY / 15% QoQ — 17% YoY / 7% QoQ adjusting for the KMIL transferred book; credit substitutes +44% YoY; corporate fee income +36% YoY, contributing 20% of bank fee income (also 20% in Q1 FY 2026-2027); Gift City remains a strategic driver for global banking needs.
• SME advances grew 27% YoY / 10% QoQ to ~Rs.1.4 lakh crore — now 24% of bank advances with resilient asset quality; the bank has sanctioned Rs.11,200 crore of ECLGS credit under the government's ECLGS program; SME reorganized into one structure focused on sole banking and family banking.
• Affluent/private banking relationship value of 13.6 lakh crore across 90,000+ families — as of 30 September 2026; Kotak 811 delivered 34% YoY savings balance growth, now 13.3% of total savings; mortgage book +14% YoY / +4% QoQ with a newly launched hybrid home loan.
• Retail microcredit +18% YoY / +5% QoQ — supported by risk underwriting and credit guarantee scheme coverage; tractor loans +11% YoY; gold loans small but growing strongly on process automation delivered in Q2 FY 2026-2027.
• Digital momentum in institutional businesses — 5x YoY growth in acquiring UPI and a 300 bps NACH market share improvement; the Fin corporate portal saw 34% YoY growth in corporate onboarding and ~60% growth in active customers. Custody balances remained impacted by muted FII flows, though domestic traction was good.

26% of Consolidated PAT Despite MTM Volatility

• Subsidiary PAT of Rs.1,450 crore, +18% YoY — 26% of consolidated profits; Q2 impacted by negative MTM on capital market-linked equity investments and yield movements on debt investments, though underlying performance remained strong; management highlighted 100% ownership across subsidiaries.
• Kotak Securities PAT of Rs.348 crore vs Rs.345 crore in Q2 FY 2025-2026 — higher brokerage offset by increased technology spending and negative MTM; retail broking rebranded as Kotak Neo; Neo account acquisitions +38% YoY with bank-referred acquisitions +41% YoY (59% of total); overall market share 13.2%, MTF book share ~14%.
• KIE distributed 13 IPOs/QIPs worth USD 6.6 billion with KMCC — and executed 14 ECM blocks worth USD 1.6 billion; cross-selling added ~109 bps to corporate banking ROE in Q2 FY 2026-2027.
• Kotak AMC PAT of Rs.287 crore, +11% YoY — on average AUM growth of 12% YoY to Rs.6,35,421 crore; Kotak Alternate Asset Managers has raised over USD 11.8 billion since inception (Q2 PAT Rs.87 crore), with management noting the non-linear business is best assessed over longer periods.
• Kotak Life shareholders' PAT of Rs.198 crore, ~300% YoY — management cautioned this is not comparable due to a one-time GST-related impact in Q2 FY 2025-2026; excluding that, profits remain steady. Gross written premium +21% YoY; life insurance AUM at Rs.1.12 lakh crore, +14% YoY.
• Kotak Prime PAT of Rs.251 crore, +2% YoY — customer assets grew 12% to Rs.47,458 crore with a disciplined approach to portfolio quality.

"Good Costs" Framework; ECL Transition Ahead

• No headline OpEx growth guide — responding to HSBC's Abhishek Murarka (who cited 10% OpEx growth in FY 2025-2026 and ~4% in FY 2024-2025), management bucketed OpEx into "good costs" (acquisition, technology, marketing) it wants to grow versus other costs (fixed overheads, paper, manual processes) it aims to cut aggressively; it declined to disclose element-wise costs or the share of good costs.
• Technology at ~13% of total OpEx in Q2 FY 2026-2027 — expected to continue at roughly that level (period unspecified); acquisition costs are strongly linked to loan and deposit origination ("correlation is very sharp").
• One-time ECL transition impact below 2% of net worth — effective 1 April 2027 (start of FY 2027-2028); the analyst noted the bank's significant excess capital can readily absorb this.
• Recurring ECL credit cost guidance of 12-15 bps higher now subject to clarifications — the guidance was given in Q1 FY 2026-2027; management expects further clarity during Q3 FY 2026-2027.
• Loan book mix: ~60% repo-linked, total floating ~65-70% — as of September 2026 (Q2 FY 2026-2027), consistent with the 70-30 floating-fixed split referenced by the analyst; relevant to the pace of repo transmission.
• Cost-to-assets at 2.4% but still above peers — the analyst noted the improvement was aided by FCNR; management declined forward guidance on a 1-2 year horizon, saying improvement will come from doing more with the same customer via acquire-and-cross-sell while cutting costs "clinically."
• Next call for Q3 FY 2026-2027 results scheduled for January 2027 — per MD & CEO Ashok Vaswani's closing remarks; no new guidance or risk commentary in the closing.