Biggest earnings downgrades have been concentrated among mid-size private banks with higher exposure to unsecured retail and MFI segments, whereas larger and more diversified banks proved more resilient. Bandhan Bank, Equitas, IDFC Bank and RBL Bank witnessed a sharp 41-95% cut in FY26E earnings over the past one year.
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Motilal Oswal Report
BFSI consensus earnings estimates have been significantly downgraded in recent months, owing to margin pressure, weak loan growth and elevated credit costs (especially in unsecured segments).
Consensus earnings estimates for private banks were lowered by 5%-14% for FY26 and 1%-6% for FY27, while PSU banks saw milder revisions for the same periods.
The steepest cuts were witnessed in mid-size private banks with exposure to the microfinance sector like Bandhan, Equitas, IDFC Bank, and RBL Bank, with a 41%- 95% decline in their consensus earnings estimates.
Large diversified banks like ICICI Bank, HDFC Bank, and SBI showed significant resilience in earnings, with modest cuts.
Our FY26/FY27 earnings growth estimates are broadly in line with consensus (+1%/+3%), though more optimistic for select mid-tier banks like RBL, DCB, and IDFC Bank (+4%-17%) and PSBs like Canara, BOB, and PNB (+6%- 16%) due to margin stability and gains from subsidiary sale.
Consensus estimates point to muted earnings growth of ~2% in FY26 and a rebound of ~16% in FY27, likely led by deposit repricing, CRR cuts and improving credit costs. We forecast 17% EPS CAGR over FY26-28E.
Top ideas: ICICI, HDFC Bank and SBI. Among mid-sized banks, we prefer AU Small Finance Bank.
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