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Indian banks forecast 18% FY28 earnings growth as margins expand
A report says Indian banks could earn much more money in fiscal year 2027-28.
It expects their earnings per share to grow by about 18 percent.
Bank profit margins may improve by nearly 15 basis points.
The report expects interest rates to rise by about 75 basis points over the next nine to 12 months.
Higher rates could help some banks earn more from lending.
Public-sector banks may also benefit from new foreign-currency deposits.
Private banks are expected to see lower expenses and credit costs.
Non-bank finance companies may face higher borrowing costs and risks to some loans.
Macquarie Equity Research forecasts 18% EPS growth for Indian banks in FY28.
The report expects margins to rise by nearly 15 basis points.
Macquarie raised its rate-tightening assumption to about 75 basis points over nine to 12 months.
PSU banks could benefit from FCNR(B) inflows, stable asset quality and higher margins.
NBFCs may face borrowing-cost and asset-quality pressures if rates and inflation rise.
- Who
- Indian banks, private banks, public-sector banks, NBFCs, insurance firms and Macquarie Equity Research.
- What
- Macquarie Equity Research forecast 18% FY28 earnings-per-share growth for Indian banks and identified opportunities and risks across the financial sector.
- Where
- India; the report was issued from New Delhi.
- When
- The forecast concerns fiscal year 2027-28; the report expects rate tightening over the next nine to 12 months.
- Why
- Expected margin expansion, supportive macroeconomic conditions, robust loan demand and attractive valuations are cited as growth drivers, while higher rates and inflation pose risks for NBFCs.
Banking-sector optimism
Financial-sector risks
Bank earnings
Banking-sector optimism
Macquarie expects Indian banks to deliver 18% FY28 EPS growth as margins expand, loan demand remains strong and credit costs fall.
Financial-sector risks
Higher rates could create pressure in parts of the financial sector, particularly for NBFC margins and borrowing costs.
Public-sector banks
Banking-sector optimism
PSU banks could benefit from FCNR(B) inflows, stable asset quality and higher rates that support margins and buffer expected credit-loss costs.
Financial-sector risks
The report still identifies risks from rate increases and notes that Bank of Baroda's outlook includes the impact of a one-off NMC case.
NBFC asset quality
Banking-sector optimism
Most NBFCs are described as well capitalised and adequately provisioned, while their valuations have become more reasonable.
Financial-sector risks
Unsecured microfinance and personal loans could face asset-quality problems if inflation persists, while higher bond yields may pressure margins.
Key facts
- Projected bank EPS growth
- 18% in FY28
- Expected margin increase
- Nearly 15 basis points
- Rate-tightening assumption
- About 75 basis points over the next nine to 12 months
- Bank valuations
- 1.3 times FY28E price-to-book and 10 times price-to-earnings
- PSU bank return outlook
- ROA above 1% and ROE of 13–15%
- Key PSU bank catalyst
- New Foreign Currency Non-Resident (FCNR(B)) inflows
- Key NBFC risks
- Higher borrowing costs, bond yields and potential asset-quality deterioration
Quotes
Macquarie Equity Research
The equity research firm issuing the banking-sector report
“We see significant re-rating potential, given undemanding valuations of 1.3-fold FY28E P/B and 10-fold P/E. Private banks should deliver strong EPS growth in the next two years as margins improve and operating expenses and credit costs fall.”
thehansindia.com
“Following solid execution and valuation consolidation among some larger names, valuations of NBFCS appear more reasonable.”
thehansindia.com
Sources
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