Indian banks are expected to post another quarter of healthy business growth for the June quarter, supported by robust loan demand across retail and corporate segments. However, higher funding costs, slower deposit growth and pressure on net interest margins (NIMs) are likely to limit earnings growth, while treasury income and provisions remain mixed across lenders.
The June quarter is expected to reflect two contrasting trends. Credit demand remained resilient despite seasonal weakness, driven by retail, gold loans, NBFC lending and selected corporate segments. At the same time, competition for deposits and a larger share of high-cost term deposits continued to weigh on margins. Analysts also expect treasury gains to remain muted for most banks despite lower bond yields compared with the previous quarter, while earnings are likely to vary depending on each lender's funding mix and exposure to unsecured lending.
The central theme this quarter is the outlook for margins rather than loan growth. Most brokerages believe credit demand remains intact, but investors will closely assess whether NIMs have reached their low point after several quarters of funding cost pressure. Commentary on FCNR(B) deposit mobilisation, deposit pricing, unsecured retail loans, microfinance stress and credit costs is also expected to shape expectations for the rest of FY27.
ALSO READ: Union Bank Q1 Results: Date, Time, Dividend News, Earnings Call Schedule And More
Here's what analysts expect from Banks Q1 FY27 results
IIFL Capital
- Loan growth remained healthy, while deposit mobilisation lagged, pushing loan-to-deposit ratios to elevated levels.
- NIMs are expected to decline by 1-15 basis points sequentially before gradually recovering over the coming quarters.
- Core operating profit should remain healthy despite weaker treasury income.
- Asset quality is expected to stay resilient, with only a seasonal increase in agricultural slippages.
- Prefers large private banks, particularly ICICI Bank, Axis Bank and HDFC Bank.
Axis Capital
- Strong loan growth and lower funding costs from FCNR inflows should support earnings.
- Deposit growth remained softer, keeping pressure on margins during the quarter.
- Asset quality is expected to improve further, with no material deterioration from recent geopolitical developments.
- Mid-sized private banks are expected to deliver stronger earnings growth than larger peers.
CLSA
- Business momentum remained healthy across most lending segments.
- NIMs are expected to stay stable to slightly lower as lower bond yields partly offset funding pressures.
- Asset quality should remain robust, although weak monsoon conditions remain a risk later in the year.
- Prefers SBI and HDFC Bank.
ALSO READ: 12 Bank Stocks, New Ratings And Top Picks — Key Takeaways From Systematix's Q1 Results Preview
Kotak Institutional Equities
- Earnings are expected to remain broadly stable despite margin pressure.
- Lower credit costs should partly offset softer NIMs and weaker treasury income.
- Risks to asset quality remain limited, with current macro conditions appearing supportive.
- Private sector banks are expected to benefit more as funding costs gradually ease.
Nomura
- Loan growth remains healthy but is becoming more uneven across lenders and loan categories.
- Margins are expected to decline modestly, with private banks seeing a sharper impact than PSU lenders.
- Softer bond yields should support treasury income compared with the previous quarter.
- Deposit mobilisation through FCNR(B) remains an important variable for margin recovery in the second half.
UBS
- Business momentum remains intact, though deposit growth continues to trail credit expansion.
- NIMs could decline by up to 10 basis points for most banks.
- FCNR(B) deposits, rural demand and MSME trends will be closely monitored.
- Prefers Axis Bank and ICICI Bank.
Antique Stock Broking
- Healthy loan growth should underpin earnings despite slower deposit mobilisation.
- Margin pressure is expected across most lenders because of funding costs and loan mix.
- Seasonal agricultural slippages may lift provisions sequentially, but overall asset quality should remain stable.
- Management commentary on margins and FCNR deposits will be critical.
Nirmal Bang
- NIM pressure is expected to overshadow otherwise healthy operating performance.
- Loan growth remains robust, but elevated loan-to-deposit ratios continue to reflect funding pressure.
- Asset quality and operating expenses should remain broadly stable.
- Top banking picks include HDFC Bank, ICICI Bank, SBI, DCB Bank and CSB Bank.
DAM Capital
- Industry loan growth and provisional business updates suggest business momentum remained strong.
- Margins are likely to remain under pressure from funding costs despite easing bond yields.
- Asset quality is expected to stay stable, with lower retail credit costs helping offset seasonal agricultural stress.
- ICICI Bank is the preferred large private bank, while Federal Bank is favoured among mid-sized lenders.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.