Private sector lender Kotak Mahindra Bank and public sector banking (PSB) heavyweight Bank of Baroda (BoB) recently released their earnings for the quarter ended June 2025 (Q1FY26), reflecting divergent trends in performance and investor sentiment.
While Kotak Bank reported a sharp fall in profitability due to elevated provisioning and narrowing margins, BoB delivered a steady performance and is emerging as a stronger value proposition.
Kotak Bank Q1: Profit hit amid jump in provisions
Kotak Mahindra Bank reported a 7.6 per cent decline in net profit for the June quarter, falling to ₹3,281.7 crore from ₹3,520 crore in the same period last year. The unadjusted profit in Q1FY25 had stood significantly higher at ₹6,249.8 crore, boosted by one-time gains from the stake sale of Kotak Mahindra General Insurance Company to Zurich Insurance.
The key drag on profitability in Q1FY26 was the steep increase in provisioning and contingencies, which jumped 109 per cent year-on-year to ₹1,208 crore. Although the net interest income (NII) rose 6 per cent to ₹7,259 crore, driven by 14 per cent loan growth. The gains were constrained by a 37 basis point fall in net interest margin (NIM) to 4.65 per cent.
Bank of Baroda Q1: Stable show, improving metrics
In contrast, Bank of Baroda reported a 1.9 per cent rise in net profit to ₹4,541 crore, up from ₹4,458 crore in the corresponding quarter of the previous year. While NII declined 1.4 per cent to ₹11,435 crore, BoB’s overall operational performance remained strong.
The bank’s global NIM dropped to 2.91 per cent, down from 3.18 per cent a year ago. However, it still beat Street expectations.
Kotak Bank, BoB: How to trade post Q1 results?
Vaqarjaved Khan, Senior Fundamental Analyst, Angel One, said the earnings report for Bank of Baroda was better than Kotak Bank, primarily due to NIM margins performing better than expected on both the firm’s internal and consensus metrics.
“Q1 FY26 NIM margins for BoB declined by 7 basis points to 2.91%. Loan growth increased 12% YoY, which is better than its peers for BoB. GNPA and NNPA ratios have remained stable for the PSU bank,” Khan noted.
He added, “On the other hand, Kotak Mahindra Bank Q1 FY26 PAT declined 8% QoQ, mainly on account of higher-than-expected margin compression as a result of weak growth in unsecured credit. Credit cost increased as well due to a rise in slippages in the MFI and retail CV segment. Meanwhile, provisions doubled to ₹1,208 crore, and the GNPA ratio rose to 1.48%, which was slightly higher than expectations.”
Varun N Joshi, Smallcase Manager and Executive Director at GoalFi, believes that as the Q1 FY26 earnings season unfolds, India’s banking sector continues to show resilience, but investor preferences may be due for a rethink. Traditionally dominated by private sector heavyweights, the narrative is shifting, and public sector giant Bank of Baroda is emerging as a serious contender, he stated.
Joshi added, “BoB reported robust operational metrics this quarter: net interest margins improved to 3.27%, return on equity came in at 15.5%, and credit growth remained strong, particularly in the retail and MSME segments. Asset quality, once a concern, now looks stable, with net NPAs at just 0.6%. Yet, despite this performance, the stock trades at a steep discount—under 1x price-to-book and less than 7x earnings—with a dividend yield exceeding 3%.”
In contrast, Kotak Mahindra Bank, long favoured for its premium positioning and conservative lending, delivered a weaker set of numbers, said Joshi.
“While the long-term franchise remains intact, the near-term outlook is clouded by slower growth and leadership changes. At over 3.5x book and nearly 27x earnings, its lofty valuation offers limited room for upside without a clear catalyst,” he added.
Kotak Bank, Bank of Baroda: Share price performances
Kotak Mahindra Bank stock has gained 17 per cent over the past year, but has shown weakness recently, with a 9 per cent drop in July after rising 4 per cent in May. In April, the stock had slipped 6 per cent following a six-month rally from November 2024.
Bank of Baroda, meanwhile, has lost 2.5 per cent over the past year, and declined 3.4 per cent in July. However, it posted strong performance earlier in the year with a 16 per cent rise in March and 9 per cent in April, reflecting renewed investor interest.
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