Bank profits likely to rise in Q4 on strong loan growth, higher fees: Report

New Delhi: Profitability of banks is expected to improve year-on-year in the March quarter of FY26, driven by steady loan growth, higher fee income and lower credit costs, according to a report by Systematix Institutional Equities.

The report notes that banks are likely to post better earnings in the fourth quarter despite ongoing pressure on margins. The improvement is largely being supported by consistent expansion in loan books, a rise in fee-based income and stabilising asset quality.

Strong momentum in advances seen at the end of the December quarter has continued into Q4 FY26, with credit growth remaining healthy across segments such as retail, services and industry. This sustained lending activity is expected to remain a key driver of earnings.

Fee income is also likely to see a sequential increase, backed by higher business volumes. However, treasury gains may face some pressure due to rising bond yields during the quarter, which could partially offset gains from core operations.

Margins are expected to remain largely stable. Net interest margins (NIMs) may stay flat or see a slight decline sequentially, as yields on advances soften following earlier rate cuts. This impact is likely to be partly cushioned by lower term deposit rates, which are adjusting with a lag.

On the asset quality front, stress in unsecured loan segments appears to be easing and is expected to remain under control. Slippages are likely to stay contained for most banks, supported by steady recoveries and upgrades, helping keep credit costs in check and supporting overall profitability.

With inputs from IANS