Banks – Jul-Sep’25 Earnings Preview – Margins to dip QoQ but may bottom out
Published on 07 Oct 2025
Banks under our coverage are likely to see a mixed quarter; while core earnings (ex-IIB) may increase by 3.1% QoQ to Rs554.5bn (-9.3% QoQ in Q1FY26) core PPoP might slightly decline. Loan/deposit growth is expected at +3.5%/+2.3% QoQ (0.6% each in Q1FY26 as Q1 is seasonally weak). LDR may rise sequentially by 103bps to 84.3%. Owing to repo rate reduction of 75bps in Q1, calculated NIM might decline by 7bps QoQ to 3.19% (-5bps in Q1FY26); however, margins might bottom out for the sector in Q2. Hence sequential NII growth would be a key monitorable. As Q1 seasonality could reverse, fees may increase by 5.2% QoQ, to Rs398.7bn, which would be offset by 5.9% QoQ rise in opex to Rs933bn. Core PPoP may be Rs903bn (-0.8% QoQ) owing to weaker NII and rise in opex. Gross slippage ratio and provisions might reduce as Q1 generally sees a spike in agri slippages while for banks like AXSB and KMB elevated stress levels would normalize. Banks’ PAT may decrease by 6.7% QoQ to Rs645.1bn. Among our coverage universe, we prefer SBI and KMB.
