.png){kind=logo}
SBI Outshines HDFC and Kotak in Q2 FY26 Results: Profit, NIMs & Provisions Compared
Overview
SBI bank outshone peers with a 10% jump in profits and robust asset quality, backed by stellar gains from the sale of Yes Bank stake.
HDFC Bank continued to post steady growth, though margin compression and higher provisions capped its profit growth.
While Kotak Mahindra Bank lagged, a 43% rise in provisions linked to AIF exposure pulled down quarterly profit.
The top three banks in India, namely SBI, HDFC Bank, and Kotak Mahindra Bank, have issued their Q2 FY26 results. The earnings have offered an in-depth view to investors with an idea of how much pressure each lender has gone through regarding margin, provisioning, and growth. SBI showed the biggest upside, aided by exceptional gains, with a double-digit profit jump. Meanwhile, Kotak Mahindra Bank underperformed amidst surging provisioning costs.
Margin Pressure Story
The second quarter across the banking universe was marked by a sharp squeeze in NIMs post the repo rate cut by the RBI in June 2025, while lower lending rates kicked in immediately, and deposit costs adjusted more gradually, compressing margins for both public and private banks.
For SBI, the domestic NIM declined to 3.09% from 3.27% a year earlier. HDFC Bank's NIM slipped to 3.4% from 3.7%, while Kotak Mahindra Bank's NIM fell to 4.54% from 4.91% a year ago. Among smaller peers, IndusInd Bank's NIM also fell sharply to 3.32% from 4.08%, underscoring industry-wide pressure.
Also Read: Stock Market Today: Sensex Slips 0.30%, Nifty at 25,673; Titan, Airtel Among Top Gainers
Loan Growth and Credit Expansion
Despite the tighter margins, credit growth remained resilient for most leading banks. SBI's advances rose 13% year-on-year to ₹43.6 lakh crore, underpinned by strong SME and agricultural loan demand. Advances at HDFC Bank jumped 10% to ₹27.46 lakh crore, though the bank remains conservative due to its already high credit-deposit ratio above 90%.
Advances at Kotak Mahindra Bank grew 15.8% to ₹4.62 lakh crore, driven by demand in home and consumer loans. Advances at IndusInd Bank, however, declined 9% to ₹3.25 lakh crore as its new management turned cautious on microfinance lending.
Provisions Decide the Winners and Losers
Provisioning was a key differentiator this quarter. SBI's provisions rose 13.8% year-on-year to ₹ 4,132 crore, but strong asset quality-net NPA at 0.42%-and a one-time gain of ₹ 4,593 crore from divesting its Yes Bank stake helped it post a 10% profit rise to ₹ 20,159 crore.
Provisions at HDFC Bank rose to 3,500 crore from 2,700 crore, which resulted in a moderate 10.8% increase in net profit at 18,641 crore. In the case of Kotak Mahindra Bank, however, provisions surged by 43.5% to 947 crore, partly due to exposure in Alternative Investment Funds, which dragged down profit by 2.7% to 3,253 crore.
On the other hand, a sharp spike in provisioning pulled IndusInd Bank into a net loss of ₹445 crore against a ₹1,325 crore profit last year and made it the weakest performer for the quarter.
Also Read: Stock Market Today: Sensex, Nifty Slip Amid Global Weakness; Markets Shut on November 5 for Guru Nanak Jayanti
Efficiency and Outlook
On the efficiency parameters, SBI reported a 1.17% return on assets, while annualised ROA for HDFC Bank stood at 1.96%. At Kotak Mahindra Bank, ROA was 1.88%, illustrating how the private banks are reporting strong profitability despite high levels of provisioning.
Going forward, analysts expect credit growth to strengthen in Q2 FY26, supported by GST cuts and RBI measures to lower lending costs. With PSU banks regaining investor interest, SBI trading at just 11x P/E appears attractively valued compared to HDFC (21x) and Kotak (22x).
SBI remains the standout performer this quarter, balancing growth and asset quality effectively. For Kotak, the near-term headwind from higher provisioning makes SBI this round's clear winner and Kotak the biggest loser.
FAQs
1. Which bank did the best in Q2 FY26?
SBI emerged as the clear winner in the September 2025 quarter, posting a 10% profit rise backed by strong credit growth, stable asset quality, and an exceptional gain from its Yes Bank divestment.
2. Why did the profit at Kotak Mahindra Bank fall this quarter?
The major reasons for a decline in Kotak's profit were a 43.5% rise in provisions related to Alternative Investment Fund exposures. Despite healthy loan growth, higher provisioning weighed heavily on its earnings.
3. How did HDFC Bank compare to SBI and Kotak?
HDFC Bank reported a 10.8% year-on-year growth in profit, but margin pressure and higher provisions took a toll. While its performance was steady, it was more conservative compared to SBI’s stronger showing.
4. What caused the decline in NIMs across Indian banks?
The cut in the repo rate by RBI in June 2025 led to lower lending rates, but deposit rates fell more slowly. This mismatch squeezed the margins for both public and private sector banks temporarily.
5. Is SBI a better long-term investment than HDFC or Kotak?
Analysts believe SBI is attractively valued at 11x P/E, as per the fiscal year 2024 estimates, versus 21x for HDFC and 22x for Kotak. With strong fundamentals, improving margins, and PSU momentum, SBI appears promising for the long-term investor.
