Analysts estimate system-wide mortgage and deposit development at round 9-10%. Treasury positive aspects are additionally prone to be weaker, as rising bond yields weigh on valuations. Moreover, banks might face some compression in internet curiosity margins with the total influence of latest repo charge cuts coming via. Asset high quality traits, notably within the SME and industrial car segments, will stay key areas to look at, analyst says.
The most important State Financial institution of India is predicted to have a mortgage development of 11% in Q2FY26, down from 15.3% a 12 months in the past, whereas deposits for SBI are seen rising 9.1% within the September quarter, unchanged from the earlier 12 months, in keeping with a CLSA report. NIM is predicted at 2.4% in Q2 from 2.7% a 12 months in the past, whereas revenue after tax is predicted to decelerate to ₹15,230 crore in Q2, from ₹18,330 crore a 12 months in the past.
In the meantime, the biggest personal sector lender HDFC Financial institution is predicted to see PAT develop to ₹16,400 crore versus ₹16,800 crore within the 12 months in the past interval. The lender may see its NIM compress to three.1% from 3.3% within the 12 months in the past. Provisional knowledge for the quarter confirmed HDFC Financial institution’s advances rose 9.9% year-on-year to ₹27.69 lakh crore on the finish of September, whereas deposits grew 12.1% to ₹28 lakh crore.
“September quarter is prone to be a tepid quarter for Indian banks, in our view,” CLSA mentioned. “Mortgage development stays modest, round 9-10%. We count on NIM to say no round 10bp sequentially in 2QFY26 for many banks. We count on some enchancment in slippages in MFI and private loans, whereas bank cards and CV loans would nonetheless be beneath stress.”
For the banking system IIFL Capital expects PAT to de-grow by 11% on 12 months as a result of NIM contraction, decrease buying and selling positive aspects and opex pick-up, partly offset by decrease credit score price. NIMs are anticipated to contract by 4-18 foundation factors within the September quarter as the total impact of repo charge cuts in June would come into play. Nonetheless, this stress is predicted to backside out in Q2, until the Reserve Financial institution additional cuts repo charge in upcoming financial coverage conferences. The RBI has reduce the repo charge by 100 foundation factors to five.5% since February 2025.Treasury positive aspects, which helped offset the influence of muted credit score development and boosted financial institution earnings within the three months to June, may sluggish considerably within the second quarter amid rising yields and as a result of absence of open market operations. A pick-up in working bills would additionally weigh on banks.”Whereas working expense development is prone to stay contained at 8% YoY, we count on QoQ pick-up to be comparatively larger for Kotak Mahindra Financial institution (campaigns), Federal Financial institution (low-cost channel hiring), ICICI Financial institution (festive and PSLC prices) and SBI,” mentioned a report by IIFL Capital.
Motilal Oswal expects personal banks’ PAT to say no 7.3% YoY and PSU banks’ PAT to fall 7.1% YoY owing to a decline in NIMs and moderation in treasury positive aspects.
“Unsecured retail stress exhibits early indicators of easing, however challenges persist in cyclical sectors like CV loans and MSMEs, with credit score prices anticipated to normalise in 2HFY26. Massive personal banks with extra diversified and secured portfolios proceed to fare higher,” the brokerage home mentioned in a report.
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