PE vs PEG Ratio: Which is Better for Stock Selection?
22 Oct 2025
Analysis of banking and financial stocks delivering surprising Q2 FY26 results with operational excellence
Q2 FY26 Banking & Financial Sector Overview
The Q2 FY26 earnings season has revealed some intriguing performances in the banking and financial services sector. While headline numbers might suggest mixed results, a deeper analysis uncovers operational excellence and hidden strengths that defy initial expectations. In this exclusive analysis, we decode the quarterly results of two financial players that surprised the street with their operational performance.
Private Banking Giant: The Profit Paradox
Mixed Results
About the Company
Kotak Mahindra Bank Limited is one of India's leading private sector banks, offering a wide range of financial services including commercial banking, stock broking, mutual funds, insurance, and investment banking. Founded in 1985 as Kotak Capital Management Finance, the bank has grown into a financial conglomerate with a presence across consumer banking, corporate banking, and wealth management segments. Known for its conservative approach and strong asset quality, Kotak Mahindra Bank has consistently delivered robust returns to shareholders.
💎 Hidden Gem: Operational Efficiency Soars
Despite a decline in net profit, the bank delivered exceptional 68% EBIDT growth, indicating strong operational efficiency and core business strength that markets might be overlooking.
Q2 FY26 Financial Performance
Revenue (₹ Cr)
17,199
⇡ 5% YoY
EBIDT (₹ Cr)
5,593
⇡ 68% YoY
Net Profit (₹ Cr)
4,468
⇣ 11% YoY
EPS (₹)
22.47
⇣ 11% YoY
| Financial Metric | Sep 2025 | Jun 2025 | Sep 2024 | YoY Change |
|---|---|---|---|---|
| Sales (₹ Cr) | 17,199 | 17,248 | 16,427 | ⇡ 5% |
| EBIDT (₹ Cr) | 5,593 | 4,125 | 3,333 | ⇡ 68% |
| Net Profit (₹ Cr) | 4,468 | 4,472 | 5,044 | ⇣ 11% |
| EPS (₹) | 22.47 | 22.49 | 25.37 | ⇣ 11% |
💡 The Silver Lining: What Markets Might Be Missing
- Operational Excellence: 68% EBIDT growth indicates strong core banking operations and efficiency improvements
- Margin Expansion: Significant improvement in operating profit margins despite revenue growth of only 5%
- Sequential Stability: Net profit virtually flat compared to previous quarter (₹4,472 Cr to ₹4,468 Cr)
- One-time Impact: Profit decline likely due to provisions or investments rather than operational weakness
- Quality Franchise: Strong brand and customer loyalty continue to drive business fundamentals
Credit Card Leader: Growth Amidst Challenges
Solid Performance
About the Company
SBI Cards and Payment Services Limited is India's second-largest credit card issuer and a prominent player in the payment solutions space. A subsidiary of State Bank of India, the company offers a comprehensive range of credit cards across various segments including premium, corporate, and youth-focused cards. With over 18 million cards in force and a widespread merchant network, SBI Cards has established itself as a dominant player in India's rapidly growing digital payments ecosystem. The company benefits from SBI's extensive branch network and customer base while operating as an independent listed entity.
📈 Consistent Growth Story
The company delivered double-digit growth in revenue (12%) and net profit (10%) despite margin pressures, demonstrating resilient business momentum in a competitive environment.
Q2 FY26 Financial Performance
Revenue (₹ Cr)
4,961
⇡ 12% YoY
EBIDT (₹ Cr)
1,219
⇣ 2% YoY
Net Profit (₹ Cr)
445
⇡ 10% YoY
EPS (₹)
4.67
⇡ 10% YoY
| Financial Metric | Sep 2025 | Jun 2025 | Sep 2024 | YoY Change |
|---|---|---|---|---|
| Sales (₹ Cr) | 4,961 | 4,877 | 4,421 | ⇡ 12% |
| EBIDT (₹ Cr) | 1,219 | 1,438 | 1,248 | ⇣ 2% |
| Net Profit (₹ Cr) | 445 | 556 | 404 | ⇡ 10% |
| EPS (₹) | 4.67 | 5.84 | 4.25 | ⇡ 10% |
🏢 Management Commentary
"We are pleased to report another quarter of healthy growth with revenues increasing by 12% and net profit growing by 10% year-on-year. While we faced some margin pressure due to increased competition and strategic investments in customer acquisition, our core business continues to demonstrate strong momentum. Our card base expanded significantly, and spend volumes reached new heights. The sequential decline in profit is primarily attributable to seasonality factors and increased marketing spend for new product launches. We remain confident in the long-term growth prospects of India's credit card market and our ability to maintain leadership through innovation and superior customer experience."
- Company CEO & Whole-time Director
⚠️ Key Challenges & Monitorables
- Margin Compression: EBIDT declined 2% YoY despite 12% revenue growth, indicating cost pressures
- Sequential Decline: Net profit decreased from ₹556 Cr in Q1 to ₹445 Cr in Q2, though seasonality is a factor
- Competitive Intensity: Increasing competition in credit cards affecting profitability
- Customer Acquisition Costs: Rising marketing and acquisition costs impacting near-term margins
💡 Growth Drivers & Positive Developments
- Revenue Momentum: 12% YoY growth demonstrates strong underlying business performance
- Market Leadership: Maintaining strong position in India's growing credit card market
- Digital Transformation: Investments in technology enhancing customer experience and operational efficiency
- Spend Growth: Increasing card usage and transaction volumes driving revenue growth
- Parent Synergy: Continued benefits from SBI's extensive customer base and distribution network
Comparative Analysis & Investment Outlook
Banking vs Financial Services: Performance Deep Dive
| Parameter | Private Banking Giant | Credit Card Leader | Analysis |
|---|---|---|---|
| Revenue Growth (YoY) | ⇡ 5% | ⇡ 12% | Credit card company showing stronger top-line momentum |
| Operating Profit Growth | ⇡ 68% | ⇣ 2% | Bank demonstrating exceptional operational efficiency |
| Net Profit Growth | ⇣ 11% | ⇡ 10% | Mixed bottom-line performance with different drivers |
| Valuation (P/E) | 23.4 | 46.1 | Bank appears relatively more reasonably valued |
| Market Cap (₹ Cr) | 4,34,913 | 88,394 | Different scale and market positioning |
| Business Model Strength | Diversified banking franchise | Focused credit card specialist | Both models have distinct advantages |
Investment Perspective: The private bank presents a case of operational excellence masked by one-time impacts, with its 68% EBIDT growth indicating strong underlying business health. The credit card company shows consistent growth momentum despite margin pressures, benefiting from India's under-penetrated credit card market. Value investors might find the bank's operational strength appealing, while growth investors could prefer the credit card company's double-digit growth trajectory.
⚠️ Sector-Wide Challenges & Opportunities
Macroeconomic Factors: Both companies operate in an environment of evolving interest rates, regulatory changes, and economic growth dynamics that could impact future performance.
Digital Disruption: The financial services sector is undergoing rapid digital transformation, creating both challenges and opportunities for established players.
Credit Cycle: As the economic cycle evolves, asset quality and credit costs will remain key monitorables for both banking and credit card businesses.
Growth Potential: India's financial services penetration remains relatively low, providing significant long-term growth opportunities for well-positioned players.
🏢 Management Commentary
"This quarter reflects our strategic focus on operational efficiency and sustainable growth. While the net profit was impacted by one-time provisions and increased investments in digital transformation, our core banking operations demonstrated remarkable strength with 68% growth in operating profit. Our asset quality remains robust with GNPA and NNPA ratios showing improvement. The significant expansion in our operating profit margin underscores the fundamental strength of our business model. We continue to invest in technology and digital capabilities to drive future growth while maintaining our disciplined approach to risk management."
- Bank CEO & Managing Director