India Banks: 1QFY27 Preview: NIMs to Compress Modestly,1.5-3.5% Credit Growth QoQ; Open 30D +ve CW on YES

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India Banks: 1QFY27 Preview: NIMs to Compress Modestly,1.5-3.5% Credit Growth QoQ; Open 30D +ve CW on YES

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25 Jun 2026 16:24:02 ET │ 32 pages

India Banks

1QFY27 Preview: NIMs to Compress Modestly, 1.5-3.5% Credit Growth

QoQ; Open 30D +ve CW on YES

Kunal Shah AC

CITI'S TAKE +912261759856

Bank Nifty outperformed NIFTY by 5-6% over last 3m/6m, though earnings kunal3.shah@citi.com

expectations remain moderate. For banks, we estimate 8-10% YoY growth Dipanjan Ghoshin NII/PPOP and PAT growth of 12-13% YoY in 1QFY27. Watchpoints: (1) NIMs

in general expected to compress modestly. Core NIMs to improve marginally +91-22 -6175-9872

for FB/IIB, stable for SBI/YES/PNB, marginally decline for HDFCB/ICICIBC dipanjan.ghosh@citi.com

and correct for RBK/AUBANK/ KMB/AXSB/BOB. (2) Credit cost estimate:

RBK 2.3%, IIB 1.9%, AUBANK 1.5%, AXSB 0.7%, KMB ~0.6%,

HDFCB/FB/YES ~50bps, ICICIBC 0.3%; PSUs: benign at 30–40bps. Mgmt

narrative on impact of Middle East conflict, though immediate direct effects

appear negligible; stress formation in PL/CC/MFI is subsiding. (3) Credit

growth YoY breaches 17% mark; QoQ credit growth of 1.5-3.5% (except IIB).

Following seasonality, sequential deposits growth should moderate qoq.

[4] Treasury tailwinds partly offset softer fees; Structural cost discipline

intact. Open 30D +ve CW on YES. We prefer private banks over PSUs at this

juncture.

NIM Trajectory: Selective deposit rate hikes, FCNR/OFCB to be margin accretive

— MCLR-linked portfolio (predominantly corporate) is repricing on reset dates, while

external benchmark-linked loans have already absorbed the full rate cut impact.

Yield trajectory will thereby be contingent on product mix shift. Few select banks

have tweaked fixed deposit rates. We expect core NIMs to improve marginally for FB