Now Reading: Bank profits top Rs 1 lakh crore for third quarter, growth set to slow
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Bank profits top Rs 1 lakh crore for third quarter, growth set to slow
Indian banks posted a net profit of Rs 1.05 lakh crore in Q1FY27, their third consecutive quarter above the Rs 1 lakh crore mark, with aggregate profit rising 14.6% year-on-year. But earnings…
Indian banks posted a net profit of Rs 1.05 lakh crore in Q1FY27, their third consecutive quarter above the Rs 1 lakh crore mark, with aggregate profit rising 14.6% year-on-year. But earnings growth is likely to moderate as credit costs have already fallen sharply, leaving banks dependent on protecting margins and growing core income, CareEdge Ratings said.
Private banks drove profit growth at 16.3%, against 12.8% for public sector banks. PSB growth was held back by a Rs 5,680 crore legacy legal settlement at one large bank, excluding that, PSB profit growth would have been about 22%. Return on assets rose marginally to 1.30%, while median return on equity improved to 12.9%.
Four large PSBs have announced capital-raising plans exceeding Rs 80,000 crore, citing preparation for the expected credit loss transition. The RBI eased rules to allow quarterly inclusion of current-year profits in CET-1 capital and discontinued the Investment Fluctuation Reserve, which strengthened core capital ratios. Analysts expect bank RoA to remain range-bound at 1.25%-1.35% through FY27.
Indian Opinion Analysis
Banks are running out of the provision write-backs that fattened recent quarters. With credit costs already near floor, earnings now depend on net interest margins, which are under pressure from sticky deposit rates and slow loan repricing. The Rs 80,000 crore capital-raising plans by four large PSBs signal preparation for the expected credit loss (ECL) framework, which the RBI is phasing in and will require banks to hold more capital against anticipated loan losses. The shift of Investment Fluctuation Reserves into CET-1, allowed by a March RBI circular, has artificially boosted core capital ratios. The real test is whether PSBs can improve asset returns without taking on risk that erodes the capital they are raising. The deposit competition will be clearer after the concessional swap window for foreign currency deposits closes at end-August. RBI quarterly data due in September will show whether PSBs are reversing their deposit market share loss.
Source: bfsi.economictimes.indiatimes.com
This brief was synthesised by AI from the source linked above.
