Steady Q4 expected for banks on strong metrics

Based on provisional data released by banks so far, they are expected to report a steady fourth quarter (Q4FY26) on the back of healthy loan and deposit growth, controlled slippages and a decent rise in profit, according to analysts.

credit, deposit up

Loan growth has been sound as hardening yields in the bond market led India Inc to turn to banks for funds, going by provisional numbers shared by the banks.

Similarly, deposit growth is up, with investors preferring safety at a time when equities are taking a beating, feeling the ripple effect of the West Asia war.

For instance, HDFC Bank, India’s largest private lender, reported a 14.4 per cent year-on-year rise in deposits and 12 per cent growth in gross advances. In the public sector space, Bank of Baroda posted 12 per cent growth in global deposits and a 16.23 per cent jump in global advances in Q4.

Overall, the business momentum for lenders has been healthy with advances up 4.8 per cent and deposits up 6.1 per cent sequentially, per an Equirus report.

“Credit growth in Q4 was led by gold loans, transport operators, NBFCs, and traders. We expect working capital demand to have been strong in Q4,” it said.

Slippages down

Against the backdrop of a volatile macro environment, ICICI Securities analysts’ envisaged the banking sector delivering a relatively steady quarter with healthy loan/deposits growth, improved slippages and broadly stable return on assets.

They expect FY26E loan growth of 13.8 per cent y-o-y, translating to roughly 4 per cent growth each quarter, with acceleration on the wholesale side due to bond substitution.

“The improvement in overall funding cost is likely to be calibrated beset by pressure from bulk deposits. While NII (net interest income) growth trails loan growth, we believe the former has bottomed out and should rise to 9 per cent y-o-y (ex-one-offs) versus 2-5 per cent y-o-y earlier.

“Treasury contribution may be muted, though AFS MTM (available for sale market-to-market) is likely to be routed outside P&L,” said ICICI Securities research analysts’ Jai Prakash Mundhra and Amansingh Sahajsinghani.

Systematix Group analysts expect the profitability of Banks in Q4FY26 to improve YoY led by (i) sustained advances growth, (ii) higher fee income (iii) lower credit costs. The strong advances growth momentum that got built at the end of 3QFY26 has sustained in Q4FY26 while the stress in unsecured segment continues to moderate.

The report noted that deposit growth continues to lag advances growth, with RBI data of 15 March 2026 showing system-level deposit growth at 3.6% QoQ and 10.8% YoY.

“Going forward, we expect (a) growth momentum in advances to slightly moderate, arising from higher inflation and slowdown in economy due to the US Iran war (b) net interest margins to be stable to better (c) some build up of stress resulting in marginally higher credit cost,” said Systematix Group analysts’ Siddharth Rajpurohit, Rishit Savla and Harsh Choumal.

YES Securities expects the net profit of State Bank of India (country’s largest bank) and HDFC Bank (largest private sector bank) to increase 7 per cent YoY (to Rs about 19,940 crore) and 5.8 per cent (to about Rs 18,640 crore), respectively in Q4FY26.

Published on April 6, 2026