Bank Stocks To 'Buy': Systematix Lists HDFC Bank, SBI Among Others Ahead Of Q2 Results — Check Full List

As per RBI data, banking system Advances expanded at 3.2% QoQ and 10.4% YoY as of Sep 19, 2025. RBI's sectoral deployment of bank credit shows an uptick in industrial segment advances from 5.5% YoY in Jun 2025 to 6.5% in Aug 2025 led by micro and small segment which grew by 20.9% YoY.

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Systematix Report

Q2 FY26 is expected to be a muted quarter in terms of profitability with most banks facing margin pressure and weak treasury income. Banks have taken both, savings account and term deposit rate cuts which are expected to help offset the adverse impact of repo rate cuts on margins.

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However, the decline in cost of deposits/funds will not fully offset the fall in yield on advances resulting in a decline in net interest margins. The profitability is expected to remain muted but to some extent will be supported by-

1. Improved sequential advances growth,

2. Higher fee income growth (in line with growth in advances),

3. Lower slippages and provisions.

However, we see the tables turning in H2 FY26 on expected-

1. Improved growth momentum in advances, arising from lower interest rates, push in consumption due to cut is GST rates, higher tax limits,

2. Net Interest Margins to see an improving trend as deposits cost is expected to trend lower with reprising of existing book, lower CRR to free up capital for generating yield, normalisation of unsecured segment slippages, resulting in lower credit cost.

While there could be near-term pain, our long-term growth outlook for the banking sector remains positive.

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