Kotak Mahindra Bank Share Price Slide 4% After Q3 FY26 Results; Higher Staff Costs Weigh on Profits

Kotak Mahindra Bank share price dropped more than 4% on January 27 after posting its December-quarter results. The fall in the stock was mainly due to higher employee costs following the implementation of the new Labour Code, which affected profitability.

Kotak Bank Q3 Financial Performance

The bank reported a 5% year-on-year rise in net interest income (NII). However, a ₹96 crore impact from the Labour Code reduced pre-provision operating profit (PPOP) growth to 8% YoY, which was below expectations. Lower-than-expected provisions helped support a 7% YoY growth in profit after tax (PAT).

Margins and Asset Quality

Net interest margins (NIMs) remained flat at 4.54% quarter-on-quarter, missing expectations of a slight improvement. On the positive side, credit costs declined to 0.63% from 0.79% in the previous quarter, aided by better recoveries. Asset quality also improved, with the slippage ratio easing to 1.34% from 1.41%.

Management Commentary

Management said that credit stress in microfinance and personal loans is easing, while challenges continue in the retail commercial vehicle segment. They expect overall credit costs to improve gradually over Q4FY26 and Q1FY27. For margins, the bank expects a moderate recovery in the next quarter, helped by benefits from a CRR cut.

Outlook on Acquisitions

On mergers and acquisitions, the bank said any deal must be financially and strategically sound. While opportunities like IDBI are evaluated, management indicated that such deals are not an immediate priority.

Conclusion

Kotak Mahindra Bank’s Q3 performance remained stable, supported by strong loan growth and improving asset quality. However, higher operating costs and muted margins weighed on investor sentiment, leading to a decline in the stock despite largely steady fundamentals.

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