Banks Q4 Preview: Stable Credit Growth Offsets Pressure On NIMs, Treasury Income

India's banks are expected to report a steady March-quarter 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 expect earnings to be supported by stronger advances growth and contained credit costs across large lenders. Net interest income is seen growing in the high single to low double digits for several banks, though profit growth could be moderated by weaker trading gains. Net interest margins are expected to diverge across lenders, with some banks benefiting from deposit repricing while others absorb the full impact of the December repo rate cut.

The key commentary this 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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Here's what analysts tracked by Bloomberg are expecting from banks in their Q4 results announcements:

Citi

• Expects 8%-10% year-on-year growth in net interest income, pre-provision operating profit growth of 8%-10%, and profit growth of 12%-15% in Q4 FY26.
• Core margins expected to expand for AU Small Finance Bank, IndusInd Bank and YES Bank; remain range-bound for ICICI Bank, HDFC Bank, Kotak Mahindra Bank, RBL Bank, State Bank of India and Punjab National Bank; and decline marginally for Axis Bank and Bank of Baroda.
• Credit growth expected at 3%-5% quarter-on-quarter, with deposits growth at 5%-8%.
• Treasury gains seen limited due to higher bond yields.
• Prefers private banks over public sector banks, with positive stance on ICICI Bank and Axis Bank.

JM Financial

• Expects a steady quarter with loan growth around 14% year-on-year across coverage.
• Large private banks expected to maintain stable growth, while PSU banks continue to gain traction.
• Margins likely flat to lower for large banks, but expanding for small and mid-sized lenders.
• Asset quality expected to remain stable, though risks are building in unsecured retail, microfinance and small business segments.
• Outlook for FY27 may remain pressured by elevated funding costs and tighter liquidity.

Nomura

• Expects modest profit growth of about 6% year-on-year for the sector, with private banks outperforming PSU lenders.
• Core pre-provision profit expected to remain healthy, supported by steady fee income and operating trends.
• Margins likely to contract modestly for large private and PSU banks after rate-cut transmission.
• Asset quality trends expected to improve, especially in unsecured retail and microfinance.
• Sees the earnings trough as largely behind the sector, with recovery dependent on stronger deposit growth in FY27.

UBS

• Expects healthy loan growth in Q4, though geopolitical uncertainty may have affected March activity.
• Margins seen in a narrow range, as lower loan yields are partly offset by gradual deposit repricing.
• Asset quality expected to remain stable, though trends in business and MSME loans remain a key watchpoint.
• Treasury income may stay muted, with possibility of losses for some state-owned banks.
• Prefers Axis Bank and Kotak Mahindra Bank among major lenders.

Jefferies

• Expects leading banks to post stronger loan growth and lower credit costs, supporting an 11% rise in profit before treasury impact.
• Loan growth expected to improve to 15% from 14% in the prior quarter.
• Margins expected lower year-on-year, with mixed quarter-on-quarter trends.
• Asset quality trends improving across segments, especially microfinance.
• Outlook for FY27 to be key in light of recent West Asia conflict.

JPMorgan

• Expects a steady quarter as system growth accelerated and delinquency trends stayed benign.
• Deposit repricing expected to offset part of the impact of the December rate cut, keeping margins broadly stable.
• Has cut FY27 and FY28 estimates to reflect slower growth and higher credit costs in select segments if disruption persists.
• Prefers ICICI Bank, HDFC Bank and State Bank of India, with a bias toward quality lenders.

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