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Bank earnings likely to grow 15% through FY28, private lenders to lead

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Bank earnings likely to grow 15% through FY28, private lenders to lead

Bank earnings likely to grow 15% through FY28, private lenders to lead

Private banks are expected to face near-term pressure on net interest margins (NIMs) as rapid business growth, FCNR(B) inflows and leverage provided against these deposits weigh on margins

System-wide credit growth stood at 18.8% YoY as of September 15, supported by retail, MSME and corporate demand, while Motilal Oswal expects growth to moderate to 15.5% in FY27. Deposit growth accelerated to 17% YoY, helped by $133 billion of FCNR(B) inflows, bringing the credit-deposit ratio down to 80.8% from 83.4%. PSU banks are expected to show greater NIM resilience, with their profit after tax estimated to rise 27% YoY in 2QFY27, compared with 24% growth for private banks. Motilal Oswal expects 15% earnings CAGR for its banking coverage universe through FY28, led by 20% CAGR for private banks against 11% for PSU banks.

The banking sector is expected to deliver a 15% earnings compound annual growth rate (CAGR) over FY26-28, led by private banks, as strong credit growth and higher deposits support business expansion. Private banks are expected to face near-term pressure on net interest margins (NIMs) as rapid business growth, FCNR(B) inflows and leverage provided against these deposits weigh on margins. Large private banks could see NIM compression of 8-20 basis points, Motilal Oswal Financial Services said in a report. Margins are expected to improve gradually as banks deploy surplus liquidity for lending and retire high-cost liabilities. Advt

8% year-on-year as of September 15, driven by sustained retail demand, higher utilisation by MSME borrowers and healthy corporate borrowings amid elevated bond yields.


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