Last Updated:
Indian banks, which together make up over a third of the Nifty index by weight, are expected to post subdued earnings growth in Q4
Bank Earnings In Q4 (Representative Image)
Indian banks, which together make up over a third of the Nifty index by weight, are expected to post subdued earnings growth for the March quarter (Q4FY25). While the results may not deliver big surprises, investor focus will likely shift toward margin protection, especially as the RBI kicks off what’s anticipated to be a deep rate-easing cycle.
PSU Banks May Outperform Peers
Public sector lenders are expected to report stronger earnings growth than private banks, largely due to lower credit costs. Loan growth is projected to remain moderate, while deposit growth may inch higher. Brokerages anticipate the upcoming rate cuts to start weighing on bank margins by 9MFY26, although most private lenders escaped this impact in Q4FY25.
NBFCs, however, could face a sharper hit. “Credit costs for vehicle financiers will be significantly higher this quarter compared to Q4 of previous years. Our NBFC coverage universe shows flat YoY earnings, weighed down by sticky credit costs and softer NII growth. Excluding NBFC-MFIs, PAT is expected to rise just ~5% YoY,” Motilal Oswal noted.
Q4FY25 Growth Projections: What to Expect
ICICI Securities projects loan growth to range between 5–15% YoY and NII growth between 6–7%. Mid- and small-cap banks are likely to fare better on NII. Overall loan growth for the quarter is estimated at 11.5% YoY (up ~3% QoQ), while MFI segment growth is expected to remain muted.
NIMs may slip 3–6 bps QoQ for banks like HDFC Bank, Axis Bank, and Yes Bank, while IIB, Bandhan Bank, and Karur Vysya Bank may see sharper NIM contraction (~10 bps). SBI and DCB Bank are expected to post flattish NIMs, supported by seasonal strength. The full impact of the repo cut is likely to show up in Q1FY26.
Motilal Oswal expects a downward bias in NIMs in the near term and a slowdown in growth, particularly in unsecured loans. Q4FY25 earnings are projected to rise just 0.5% YoY, with an 11.8% CAGR forecast for FY25–27. Earnings growth is expected to bottom out in FY26 before recovering in FY27. Credit growth is expected to hold steady around 12% YoY in FY26.
Nuvama: Loan Growth Soft, NIMs Slip Marginally
According to Nuvama, loan and deposit growth may look soft on a YoY basis, though sequential improvement is likely. System liquidity improved in Q4FY25, helping banks post better sequential performance. However, NIMs are expected to contract 2–4 bps QoQ. Slippages for non-MFI private banks are likely to fall, while remaining elevated for MFI lenders. For NBFCs, margin gains may fall short of expectations as lending rates decline.
“Deposit growth could improve by 1–2%, roughly in line with loan growth, as liquidity improves. However, overall loan growth may remain capped at 12–13%. Rate cuts could drag NIMs in 9MFY26, though most private lenders were insulated in Q4,” Nuvama added.
Top Brokerage Picks Ahead of Q4 Earnings
Nuvama’s Picks:
- Buy on Axis Bank, Bank of Baroda, Federal Bank, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, and SBI.
- Axis Bank: NIM seen at 3.93%, QoQ loan growth at 2.8%, NII at Rs 139.7 bn, PAT at Rs 72.2 bn.
- HDFC Bank: NIM projected at 3.40%, QoQ loan growth at 1.24%, NII at Rs 312.7 bn, PAT at Rs 170.5 bn.
- ICICI Bank: Expected to report a NIM of 4.27%, loan growth at 3%, NII at Rs 208.4 bn, PAT at Rs 123.5 bn.
- Kotak Mahindra Bank: NIM at 4.89%, QoQ loan growth at 4.51%, NII at Rs 74.3 bn.
- SBI: Loan growth likely at 14% YoY, NIM at 2.98%, QoQ loan growth at 4%, NII at Rs 426.9 bn, PAT at Rs 197.6 bn.
ICICI Securities’ Picks:
- Buy on HDFC Bank, Axis Bank, SBI, Bandhan Bank, City Union Bank, Karur Vysya Bank, South Indian Bank, and DCB Bank.
- Add on Federal Bank and IDFC First Bank.
- HDFC Bank: NII at Rs 3,09,410 mn, PAT at Rs 1,65,074 mn, loan book at Rs 26,078 bn (QoQ growth of 3.6%).
- Axis Bank: QoQ loan growth at 3.3%, NII at Rs 1,38,169 mn, PAT at Rs 66,106 mn.
- SBI: QoQ loan growth at 5.2%, NII at Rs 4,32,460 mn, PAT at Rs 1,73,937 mn.
Motilal Oswal’s Picks:
- Top picks include ICICI Bank, HDFC Bank, SBI, and AU Small Finance Bank.
When Are Bank Results Due?
As per the BSE website, ICICI Bank and HDFC Bank will be the first to report results on April 19. Other banks will follow in the coming weeks. Stay tuned to FinancialExpress.com for real-time coverage and insights on Q4 earnings.
