Kotak Mahindra Bank Q3FY26 results underline a familiar theme playing out across India’s private banking sector- steady balance sheet growth, improving asset quality, but sustained pressure on margins. The private lender reported a standalone profit after tax (PAT) of ₹3,446 crore, up 4% year-on-year, compared with ₹3,305 crore in Q3FY25.
Total income increased to ₹16,741 crore during the quarter, from ₹16,050 crore a year ago, supported by healthy loan growth and higher fee income. However, profit growth remained modest, reflecting margin compression and rising operating expenses.
Kotak Bank Loan Growth Remains Robust
Kotak Mahindra Bank continued to post strong credit expansion. Net advances rose 16% YoY to ₹4.81 lakh crore as of December 31, 2025, from ₹4.14 lakh crore a year earlier. Growth was supported by steady demand across retail and wholesale segments. Customer assets, including advances, IBPC and credit substitutes, grew 15% YoY to ₹5.29 lakh crore, reinforcing the bank’s consistent balance sheet momentum. The credit-to-deposit ratio stood at 88.6%, indicating efficient capital deployment, though leaving limited headroom for aggressive lending without faster deposit growth.
Deposit Growth Keeps Pace, CASA Ratio at 41.3%
Deposits grew broadly in line with advances. Total deposits increased 15% YoY to ₹5.43 lakh crore in Q3FY26, while average total deposits rose to ₹5.26 lakh crore. Term deposits grew faster at 19% YoY, reflecting intense competition for deposits across the banking system. As a result, the CASA ratio moderated to 41.3%, though it remains among the healthier levels in the private banking space. Importantly, the cost of funds declined to 4.54%, from 5.06% in Q3FY25, offering partial relief against margin pressure.
Kotak Bank NII Up, But NIM Compression Persists
Net Interest Income (NII) increased 5% YoY to ₹7,565 crore, driven primarily by loan growth. On a sequential basis, NII rose 3%. However, Net Interest Margin (NIM) declined to 4.54%, compared with 4.93% in the year-ago period, reflecting yield compression and higher deposit costs. While margins have stabilised quarter-on-quarter, the YoY decline highlights the challenge of sustaining elevated profitability in a competitive interest rate environment.
Fee Income Growth Supports Profitability
Non-interest income provided a key buffer. Fees and services income rose 8% YoY to ₹2,549 crore, supported by transaction banking, retail distribution and service-related revenues. The growth in fee income helped offset the impact of softer margins on overall earnings.
Operating Expenses Rise; Labour Code Impact Visible
Operating expenses increased 8% YoY to ₹5,023 crore, including an incremental ₹96 crore cost related to the implementation of the new Labour Code. Excluding this one-off impact, operating expenses grew a more moderate 6%. The cost-to-income ratio stood at 48.3%, improving to 47.4% after adjusting for labour-related costs, indicating that operating efficiency remains broadly intact.
Asset Quality Improves, Credit Costs Decline
Asset quality trends remained stable during the quarter. Provisions declined to ₹810 crore, compared with ₹947 crore in the previous quarter. Credit cost (annualised) improved to 0.63%, from 0.79% in Q2FY26, reflecting better asset quality and lower stress formation.
Outlook: Growth Steady, Margins Key Monitor
With a customer base of 5.1 crore, Kotak Mahindra Bank continues to strengthen its franchise and grow at a steady pace. However, the Q3FY26 earnings highlight that while loan and deposit growth remain healthy, margin sustainability and cost control will be critical drivers of profitability going forward. For investors and analysts tracking Kotak Mahindra Bank results, key monitorables in coming quarters will include NIM trajectory, deposit mix, operating cost discipline and credit quality, as the broader Indian banking sector navigates a shifting interest rate cycle.