Large public sector banks outperformed private sector banks in Q4FY26 on key metrics, including year-on-year growth in net profit, net interest margin and loan growth, a NDTV Profit analysis showed.
PVBs, however, beat PSBs on fresh slippages, reflecting better underwriting standards. Most banks reported a steep fall or loss in trading income in the reporting quarter, on account of volatility in broader markets.
Loan, Deposit Growth
The top three largest PVBs and PSBs reported a double-digit rise in loans and deposits in the reporting quarter, except Punjab National Bank (PNB), which reported a 9% y-o-y growth in deposits. PVBs' loans grew in the range of 10-19% y-o-y in Q4, while PSBs' loans grew at a faster pace of 13-17% y-o-y in Q4. Lenders focused on growing the share of retail, MSME, agriculture and unsecured loans more to improve yield on assets.
PVBs saw deposit growth of 11-14% growth in overall deposits. PSBs' deposits, meanwhile, rose 9-12% YoY in Q4. Most banks continue to see moderation in low-cost current account and savings account ratio (CASA). For FY27, large banks expect double digit growth in both loans and deposits, but a few lenders refrained from sharing exact guidance on account of business uncertainties posed by the West Asia conflict.
NIM Trajectory
PSBs outperformed PVBs in margin expansion in Q4, with State Bank of India (SBI) being an exception. SBI's NIM fell 17 basis points (bps) sequentially to 2.81% in Q4. The bank's management counted repo rate transmission on loan interest rates as key reason for margin contraction, but said the lender will deliver 3% plus NIM in FY27 by changing its asset mix.
Among PVBs, HDFC Bank and Axis Bank reported 2 bps quarter-on-quarter (q-o-q) fall in NIM in Q4, while ICICI Bank's margin expanded 2 bps. Analysts say banks are likely to face continued pressure on margins in FY27 on account of limited space in cutting deposit rates, and having already done re-pricing of loans linked to marginal cost of funds-based lending rate (MCLR) and external benchmarks.
Asset Quality
PVBs performed much better than PSBs on fresh slippages, with the top three banks' fresh slippages falling 20-28% q-o-q. Among large PSBs, PNB's fresh slippages were up 47% q-o-q to Rs 2,674 crore. BoB' fresh slippages were up 10% q-o-q, while SBI's fresh slippages rose 24% q-o-q to Rs 5,521 crore in Q4.
Key Trends in Q4
- Select banks have started making floating provisions to meet expected credit loss (ECL) norms, applicable from April next year.
- West Asia conflict currently does not show any impact on loans and remittance business. Bankers maintain cautious views on second, third order effects.
- Lenders booked steep fall/loss in treasury income.
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