Banks' guidance this earnings season will be closely watched for any signs of stress in the small and medium enterprise (SME) segment due to the US-Iran war, which has largely driven uncertainties on business conditions since late February.
Flagging concerns over asset quality, Aditya Shah, founder of Hercules Advisors, told NDTV Profit that if banks highlight such an issue, it will result in growth of non-performing assets (NPAs).
"As this war goes on, we have been hearing that a lot of small and medium enterprises are starting to face problems. If the banks report they are seeing some stress there, it could automatically mean some bit of NPAs."
Major banks are scheduled to announce fourth quarter earnings on Saturday, April 18, including HDFC Bank and ICICI Bank.
In the quarter under review, banks are expected to post a steady performance, with healthy loan growth and stable asset quality, while net interest margins are seen largely range-bound and treasury income may soften after the rise in bond yields.
Brokerages note that banking earnings are expected to be supported by stronger advances growth and contained credit costs across major lenders, NDTV Profit earlier reported.
The net interest income will likely grow in the high-single to low-double digits for most banks, while profit growth may remain moderated by weaker trading gains.
ALSO READ: ICICI Bank Q4 Results: Date, Dividend News, Earnings Call Time And Other Key Details
Meanwhile, net interest margins may diverge across banks, with some benefiting from deposit repricing and others absorbing the full impact of the repo rate cut in December. The commentary in the fourth quarter earnings season will centre on deposit mobilisation, loan demand, unsecured retail and microfinance stress, credit costs, and the pace of NIM recovery in FY27. Investors will also watch whether geopolitical tensions and higher funding costs begin to affect growth trends in the new financial year.
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