Analysts estimate profit after tax (PAT) at private lenders would climb 10% year-on-year in Q1FY27, compared with 9% for PSU banks, according to brokerage Motilal Oswal.
Provisional numbers already point to a similar divergence in balance-sheet growth: private banks expanded deposits 14% YoY in the June quarter, well ahead of 11% at PSU banks.
However, PSU banks flipped the script on lending, expanding loan books 16.4% YoY versus 15.9% for private banks.
Investor attention, analysts say, will stay sharply bank-specific – from State Bank of India‘s growth sustainability and credit costs, to HDFC Bank‘s net interest income amid leadership changes, ICICI Bank‘s trajectory on return on assets, Axis Bank‘s margins post re-rating, and Kotak’s margin defense during its management transition.
“India’s banking sector enters the 1QFY27 earnings season with macro concerns still dominating sentiment, even as operating fundamentals remain resilient. Recent trends suggest growth, margins and asset quality are holding up better than feared, shifting the focus toward company-specific execution and the sustainability of earnings momentum,” said Pranav Gundlapalle, Head of India Financials at Bernstein.
Motilal Oswal expects pre-provision operating profit (PPoP) for private banks under its coverage to decline 8% YoY. Net interest income (NII) is estimated to rise 10.4% YoY, with HDFC Bank at 8.5% YoY, ICICI Bank at 10.5% YoY, Axis Bank at 10.6% YoY, and Kotak Mahindra Bank at 10.1% YoY.
For state-run lenders, Motilal Oswal is estimating range-bound net interest margins (NIMs), modest fee income, and a boost from treasury gains as bond yields have eased from their peaks. NII is expected to grow 11% YoY.
Sector credit growth stood at 17.7% year-on-year as of 15 June, but the divergence runs deeper than just private versus PSU, says brokerage house Nomura.
“Sectoral credit data for May-26 shows the bulk of incremental growth over Mar-May’26 came from gold loans, corporate credit and NBFC lending, all lower-yielding segments, pointing to a growing growth-NIM trade-off,” it said in a report. “We expect margins to see marginal compression across most banks in 1Q27, though the deposit-credit growth gap should narrow from 2QFY27 as incremental FCNR(B) deposits provide support.”
YES Securities flagged that fresh slippages could tick up modestly this quarter due to early effects of West Asia-linked supply-chain disruption, lingering tariff-war impact, and slow nominal GDP growth. It expects sequential provisioning increases at ICICI Bank, SBI, Kotak and IDFC First Bank. NIMs are expected to stay largely stable sequentially as the effects of repo-rate and MCLR cuts have mostly played out.