FY26 likely to bring slight recovery in banks' earnings growth momentum

FY26 may see a modest recovery in earnings growth after a period of bottoming out

The banking sector and more broadly, financials, have outperformed the Nifty50 in FY25 in terms of index returns. The Nifty50 is up 5.3 per cent, while the Bank Nifty has gained 9.4 per cent and the Nifty Financials rose 19.5 per cent. Some private banks like HDFC Bank (26 per cent), ICICI Bank (23 per cent), Kotak Mahindra Bank or KMB (21 per cent), and Federal Bank (28 per cent) have done very well.

 

However, earnings growth has been trending down, with credit growth decelerating to 11 per cent year-on-year (Y-o-Y), versus an average credit growth of 16 per cent