As HDFC Bank Ltd and ICICI Bank are set to release their Q3 FY26 report card today, investors’ focus will be on revenue growth and Net Interest Margin. According to several brokerage houses, such as Kotak Institutional Equities and BNP Paribas Securities India, the banking sector is likely to see muted revenue growth and an NIM under pressure in the quarter.\
Here is a closer look at the banking sector’s revenue and NIM growth forecasts, with the larger banks expected to suffer more than the mid-sized and small banks.
Revenue slowdown
A Kotak Institutional Equities report says that the bank sector is expected to report a muted revenue growth in Q3 FY26. The report notes that muted revenue growth in the quarter would lead to flat profit growth as well.
A BNP Paribas Securities India says that the Q3 FY26 earnings season appears unlikely to carry a slew of major surprises. “With loan growth improved by mid-December last year, but still at 12% at the system level, earnings growth appears muted for most banks in 3QFY26,” the report adds.
However, a Deven Choksey Research report says that the majority of banks are expected to see Net Interest Income (NII) grow in the low double digits annually and in the mid-single digits quarterly. The report adds that while a high base will hamper YoY PAT growth, this will be offset by normalisation in credit costs from elevated levels seen in select banks, and the overall banking PAT growth is likely to be faster than NII growth.
Margin under pressure
The Kotak report says that the banking sector’s Net Interest Margin (NIM) is likely to remain flat on a quarterly basis in Q3 FY26. The report points out that, even though the banking sector is hoping for better margins ahead, management may remain cautious due to intensifying competition, low deposit growth, and the full implementation of the RBI rate cuts.
Kotak expects small- and mid-sized public and private banks to be better positioned than the industry-leading larger banks.
BNP Paribas Securities India report says that the QoQ margin decline for banks from the December rate cut is unlikely to be dramatic, given that the impact period is less than a month and an ongoing rate-cut cycle has already activated benign liability-side tailwinds.
BNP Paribas Securities India cautions that the quarter-on-quarter margin drop for the banking sector is also likely to increase in Q4 FY26, compared to Q3 FY26.