Financial Services – Jan-Mar’26 Earnings Preview – Stable NIM; credit cost to moderate
Published on 09 Apr 2026
We expect an uptick in growth for auto financiers due to the relief from GST cuts, replacement demand and pick-up in infrastructure spending. However, commentary around the impact of the Gulf War on economic activity is critical for sustained momentum. Cost of borrowing has moderated in Q3 for most NBFCs; however, the recent hardening of bond yields might offset some of the benefit. Expect credit cost to moderate with lower delinquencies in VF and run-down of stressed portfolio (CIFC). However, stress persists in the MSME segment and recovery is likely to be delayed due to the Gulf War. Large HFCs to see some pick-up in growth (LICHF, CANF). Upgrade CANF to ‘BUY’ from ‘ACCUMULATE’. While covered HFCs have taken PLR cuts, they are looking to raise NCDs/ funds at a subsidised rate to maintain NIM. Expect recoveries in key accounts (LICHF). BAF has reported an AUM growth of 22% YoY- commentary around pick-up in growth and asset quality in MSME are key. We downgrade BAF to ‘ACCUMULATE’ from earlier ‘BUY’.
