Banking Sector Q2 Results Preview: Margin Pressure, Lower Trading Gains To Temper Earnings Growth

India's banks are expected to report softer earnings for the September quarter, as narrowing net interest margins and weak trading gains weigh on profitability. Analysts, however, see stability in core earnings and expect commentary to turn more constructive on growth and asset quality.

Axis Bank will be the first to announce September-quarter results on Oct. 15, kicking off an earnings season for the Indian banking sector.

Loan growth remained strong across most lenders during the quarter, supported by higher deposit mobilisation and an improvement in loan-to-deposit ratios. However, analysts expect profitability to be hit by margin pressure following the Reserve Bank of India's earlier repo-rate cuts and reduced treasury income. Despite that, lower credit costs and easing slippages in agriculture and microfinance loans could lend stability to core earnings.

Analysts view the quarter as a near-term bottom, expecting earnings momentum to recover from the December quarter as funding costs stabilise and credit demand improves. Commentary on growth revival, net-interest-margin trends and asset quality will be closely watched as banks adjust to policy changes and liquidity measures.

Here's what analysts are expecting from the banks during their Q2 results announcements:

• Banks are likely to see slower profit growth in Q2 FY26 due to lower trading gains and margin compression.

• Core earnings are expected to stay stable as lower credit costs and better loan-to-deposit ratios offset pressure on the NIMs.

• Commentary expected on growth revival and asset quality after regulatory and tax changes.

• Mixed quarter seen, with core pre-provision operating profit slightly weaker.

• Loan growth around 3.5% quarter-on-quarter, while the NIM may decline seven basis points to 3.19%.

• Margin expected to bottom out this quarter; fees may rise 5% sequentially, offset by higher operating costs.

• Gross slippages and provisions likely to fall, with profit after tax down 6.7% quarter-on-quarter.

• Profit of large banks likely to fall 12% year-on-year due to lower treasury gains and margin compression.

• Expects margin to stabilise from the next quarter and expand from Q4.

• Credit quality to improve as unsecured and microfinance loan stress moderates; public sector banks may show steadier margin.

• Q2 seen as the weakest quarter, with profit after tax down 5% both year-on-year and quarter-on-quarter.

• Margin compression of 5–40 basis points expected, with large banks faring better than mid-tier peers.

• Loan growth likely to improve; credit costs contained for large banks but elevated for mid-tier ones.

• Sees improvement in earnings and margin from Q3 FY26.

• Margin to fall by 10–20 basis points for private banks and 7–10 basis points for public sector lenders.

• Sees stronger performance in H2 FY26, supported by liquidity easing, tax cuts and higher unsecured retail lending.

• Credit costs may improve as microfinance stress declines; maintains preference for private and mid-sized banks.

• System-wide loan growth at about 10.4% year-on-year, with deposit growth near 9.5%.

• Margin to fall 7–21 basis points as repo rate cuts fully reflect in yields.

• Treasury gains expected to drop sharply due to higher bond yields; liquidity conditions remain surplus.