Banks – Jul-Sep’26 Earnings Preview – FCNR(B) drives strong loan growth; NIM to moderate
Published on 07 Oct 2026
Banks under our coverage are likely to see good quarter driven by FCNR(B) related loan & deposit growth and healthy offtake in domestic credit. Provisional numbers of banks suggests a strong loan growth of 6.5% QoQ for our coverage universe of which (1) 1.5-2.0% is attributable to FCNR (B) related overseas loans (2) 4.5-5.0% is led by domestic credit on the back of strong growth across corporate, retail, MSME and agri. Deposit growth QoQ is likely to be 6.2% QoQ (4.0-4.5% led by FCNR). Hence, we have seen an upgrade in core earnings for our coverage banks by 0-2% in FY27E & 4-6% in FY28E. NII growth QoQ would be +3.4% QoQ (lower than loan growth) as calculated NIM might fall ~3bps QoQ to 3.14% due to (1) lower yield on overseas loans (2) liquidity surge on account of influx of FCNR(B) deposits (3) CASA reduction as FCNR(B) deposits are TD in nature. Core PPoP is likely to see a softer growth of 2.6% QoQ to INR1.24trn due to seasonality in expense accrual in case of SBI. Asset quality may be steady although we see a 5bps QoQ increase in provisions to 54bps due to increase in std. asset provision related to FCNR(B) loans and normalization. Core PAT may be flat QoQ at INR762bn. Bank performance should be analyzed excluding the impact of FCNR (B) and ICICIBC, KMB, CBK, FB and KVB could be outliers.
