When will Indian banks see a profit surge?

JPMorgan forecasts a significant profit acceleration for Indian banks, with earnings expected to grow substantially from FY26 through FY28.

Why are Indian bank margins improving?

Net interest margins are stabilizing as deposit costs cease to rise faster than loan yields, ending a two-year squeeze.

How do banks compare to NBFCs?

NBFCs have outperformed banks, but analysts expect this gap to narrow as bank earnings accelerate.

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Indian Banks Poised for Profit Surge

2 Dec

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Summary

Indian banks anticipate a profit surge with earnings projected to double.
Net interest margins stabilize, ending a two-year squeeze on bank profits.
Analysts expect a narrowing valuation gap between banks and NBFCs.

Indian banks are projected to experience a substantial surge in profits, with financial analysts anticipating a "tsunami of profit" as their net interest margins (NIMs) bottom out.

For approximately two years, banks contended with declining NIMs due to rising deposit costs outpacing loan yields. However, the trend reversed in the second quarter of the current fiscal year, signaling an end to the margin squeeze. With funding costs stabilizing, banks are now positioned for improved returns.

Analysts predict earnings to grow at a robust annual rate of 17% from FY26 to FY28, more than double the 8% CAGR observed in FY24-FY26. This growth, supported by slower deposit repricing and consistent loan expansion, is expected to enhance banks' return on assets and provide a steadier earnings base.

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