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Motilal Oswal Report
Banking sector may post healthy earnings growth in the June quarter, supported by robust credit growth and stable asset quality, though margin trends are expected to remain mixed, according to Motilal Oswal's Q1FY27 results preview.
The brokerage expects systemic credit growth, which stood at 17.7% YoY as of mid-June 2026, to continue supporting business momentum across lenders. However, deposit mobilisation remains a key challenge, with industry-wide deposit growth of around 12% lagging loan growth and keeping competition for deposits intense.
For the banking universe under its coverage, Motilal Oswal expects net interest income (NII) to rise 10.9% YoY in the June quarter, while aggregate profit after tax (PAT) is seen growing 9.6% YoY.
Private banks are projected to report PAT growth of 10.1% YoY, while PSU banks are expected to post a 9% increase.
Despite margin pressures, asset quality trends remain encouraging. Stress in unsecured retail loans and microfinance portfolios continues to ease, while most banks have indicated a stable credit environment. Motilal Oswal expects credit costs for large private banks to remain contained, with PSU banks likely to continue benefiting from benign asset-quality trends.
The brokerage's preferred picks in the sector remain State Bank of India (SBI), ICICI Bank, HDFC Bank and AU Small Finance Bank.
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