Banks – Oct-Dec’25 Earnings Preview – Rate cut impact to be offset by CRR cuts
Published on 08 Jan 2026
Banks under our coverage are likely to see a steady quarter; core earnings (ex-IIB) may increase by 0.9% QoQ to Rs606bn (+7.1% QoQ in Q2FY26) as core PPoP might inch up by 1.6% QoQ. Loan momentum is expected to sustain; we see 3.6% QoQ growth (4.1% in Q2’26) while deposit accretion could continue to be soft at 2.4% QoQ (2.1% in Q2’26). LDR may rise sequentially by 100bps to 85.0% due to CRR cut of 100bps over Sep-Nov’25. Hence, calculated NIM might be flat by QoQ at 3.14%; repo rate cut of 25bps would be offset by CRR fall. NIMs might bottom out for the sector in Q3/Q4FY26. Fees may rise by 0.8% QoQ to Rs440.9bn, which would be offset by 2.0% QoQ rise in opex to Rs1.03trn. Core PPoP may be Rs1.0trn (+1.6% QoQ) due to 2.6% rise in NII. Due to higher loan growth and no impact of labour code on staff cost, PSU banks could see an operationally better quarter vs private banks (except ICICIB). Gross slippage ratio might increase by 20bps QoQ to 1.2% as Q3 generally sees a spike in agri slippages. Banks’ PAT is expected to decrease by 5.7% QoQ to Rs705bn. Among our coverage universe, we prefer SBI, ICICIB and KMB.
