Banking sector to see earnings recovery from Q2FY26, strong 17.7% CAGR profit expected over FY26-28: Report
New Delhi [India]October 2 (Memorial): According to a research report of Motilal Oswal Corporate Stocks, the Indian banking sector will witness the gains in the second half of the 26 fiscal year after a quiet September quarter performance marked in profitable in profitability of margin, moderate credit growth and private and public loans.
The report stressed that 10.3 percent (YOY) systemic credit growth reflects the softness of demand in both retail and corporate segments as of September.
26 Full year credit growth for the fiscal year, lower borrowing costs, GST rate cuts and income tax reduction with the help of 11 percent of the 27 percent of the 11 percent (YOY) is expected to rise to 12.5 percent.
According to the report, “As we get earnings from 2HFY26, we estimate 17.7 percent according to 26-28E.”
The report is expected to declare a decrease of 7.3 percent (YOY) in the net profit below the coverage area of private sector banks26.
Sitedly, the earnings fell by 6.7 percent, the net interest income (NII) for the segment is fixed as 0.6 percent (YOY) and with the pressure on the margins due to the delayed effect of the policy rate cuts. It is estimated that the business profit will fall by 2 percent (YOY) and 18 percent (QOQ).
“We estimate about 19.8 percent for private banks compared to 26-28E.”
In the report, while continuing to weigh unsecured retail stress, symptoms of early alleviation may be seen. Credit costs are likely to normalize in the second half of the 26 fiscal year.
However, large private banks with diversified portfolios are expected to charge relatively better.
Public sector banks (PSBs) are expected to receive weaker numbers, a quarter net profit 7.1 percent (YOY) and 1.9 percent (QOQ) decreased.
For the segment, NII is likely to fall by 2.5 percent (yoy). Treasury gains are expected to be moderate due to range -related bond returns, while NIMs are under pressure among large PSBs. PSU Banks are estimated to CAGR with 15.2 percent of the 26-28 fiscal year.
“We expect PSU banks to earn CAGR by 15.2% according to 26-28E,” the report says.
In the report, margins for small financial banks (SFB) are expected to be under pressure in the second quarter.
However, despite the recent stress, the stress in the microfinance begins moderately, and for them, credit costs are expected to gradually alleviate in the second half of the 26 financial year.
“The railings of the new MF implemented in FY26 help to measure growth while helping to gradually recovery in asset quality.”
In general, the net profit of the banking sector is estimated to fall 7.2 percent (YOY) in the second quarter26. However, deposit recurrence, a gradual CRR cut and funding costs are expected to heal margins in the next neighborhoods. The earnings traction is expected to gain momentum from 2HFY26, the report estimates a strong snow of 17.7 percent in the financial year 26-28. (MOMENT)
