Kotak Mahindra Bank shares fell more than 2 percent on Monday after the private sector lender reported its earnings for the first quarter of FY27, with investors reacting to pressure on net interest margins despite steady profit growth.

The stock declined as much as 4.68 percent to Rs 2,376.10 per share in early trade on the NSE. It later recovered some losses and was trading at Rs 2,430.55, down 2.41 percent around 11:50 pm.

The selling pressure followed the bank's June quarter results, where net interest income (NII) growth lagged loan growth and net interest margin (NIM) contracted.

According to ICICI Securities, deposit growth moderated to 12 percent year-on-year and remained flat sequentially. Floating-rate savings account balances continued to moderate, while the calculated cost of funds rose by 6 basis points quarter-on-quarter.

The brokerage said calculated NIM declined by 9 basis points sequentially, while reported NIM fell 14 basis points quarter-on-quarter to 4.53 percent, which the bank attributed to an adverse day-count effect. NII grew 9 percent year-on-year and 1 percent quarter-on-quarter but remained below loan growth. Core fee income rose 11 percent year-on-year, while operating expense growth was contained at 7-8 percent. The standalone liquidity coverage ratio improved to 134 percent from about 122 percent in the previous quarter.

ICICI Securities noted that loan growth moderated marginally to 15 percent year-on-year in the June quarter. Growth was led by the SME segment at 20 percent, followed by corporate loans at 15 percent, while retail loans grew 12 percent and commercial vehicle and tractor loans rose 7 percent.

The brokerage added that the credit substitutes book expanded 27 percent year-on-year and 38 percent sequentially. Unsecured retail lending recorded its third straight quarter of sequential growth, taking year-on-year growth to 4 percent after several quarters of moderation. The bank said organic personal loan growth remained in double digits, although the run-down of the Standard Chartered portfolio continued.

ICICI Securities maintained its estimate of around 16 percent loan CAGR over FY26-28 and has a target price of Rs 2,480 on the stock, implying a potential upside of about 23 percent.

Bernstein retained its 'Market Perform' rating with a target price of Rs 500. The brokerage said the bank delivered a steady quarter with broad-based loan growth and stable asset quality. However, it said margin pressure persisted, with NIM declining sequentially despite an improving loan-to-deposit ratio. It added that earnings growth was supported by cost discipline and lower credit costs, helping the bank sustain a return on assets above 2 percent. It also noted that deposit growth lagged peers and elevated capital levels continued to weigh on return on equity.

Jefferies maintained its 'Buy' rating with a target price of Rs 460. The brokerage said standalone profit of Rs 41 billion, up 26 percent year-on-year, exceeded estimates due to better NII, fee income and lower credit costs. It noted that loans grew 15 percent, NII rose 9 percent and deposits increased 12 percent, while the loan-to-deposit ratio stood at 89 percent. Jefferies said credit quality continued to improve, supported by better trends in the microfinance and credit card portfolios, and raised its FY27 earnings per share estimate by 2 percent. It added that clarity on the bank's chief executive officer remains an important factor.