India’s banking sector delivered a mixed performance in Q4FY25, with profit growth diverging sharply across private, public, and small finance banks. While sector heavyweights like HDFC Bank and ICICI Bank posted modest to healthy growth, State Bank of India (SBI), Kotak Mahindra Bank, and Axis Bank reported disappointing numbers. Moreover, a few mid-sized and small banks surprised the Street with explosive profit figures.
Private banks dragged the overall profitability of the banking pack, delivering a 6% year-on-year decline in net profit for Q4FY25. Motilal Oswal Financial Services, in a review note, described the quarter as having “mixed” outcomes.
Among the leading banks, ICICI Bank posted the best set of numbers, recording an 18% YoY growth in profit after tax (PAT), while net interest income (NII) climbed by 11%. HDFC Bank’s bottom line increased by 7% YoY, and its NII saw a 10% uptick.
Axis Bank, SBI, and Kotak Bank reported a fall in PAT between 0.17% and 14% in the quarter under review. Meanwhile, IndusInd Bank reported a consolidated net loss of Rs 2,329 crore in Q4FY25, compared to a net profit of Rs 2,349 crore in the year-ago period, amid losses in its derivatives segment and fraud-related issues. The private lender's NII also declined 43% YoY.
Top dogs: Small banks steal the show
Dhanlaxmi Bank led the pack with a jaw-dropping 776% YoY rise in PAT, backed by a 28% increase in NII. Next in line was Bandhan Bank, which reported 482% PAT growth, even though its NII declined by 4%. Punjab & Sind Bank (PSB), Bank of India (BoI), and Punjab National Bank (PNB) delivered strong earnings growth, with PAT up 124%, 82%, and 52%, respectively.
Among small finance banks (SFBs), AU Small Finance Bank stood out with a 36% PAT rise and a robust 57% NII growth, reflecting strong operational momentum.
One of the widely tracked lenders, Yes Bank, reported a robust 63% PAT growth along with a 6% NII jump.
PSU banks Q4 key takeaways
Several public sector banks reported robust bottom-line growth despite modest NII gains. Canara Bank's PAT jumped 33%, although its NII declined by 1.4%. Union Bank, Indian Bank, and Indian Overseas Bank (IOB) reported net profit growth of 51%, 32%, and 30% YoY, while their NIIs increased by 1%, 6%, and 13%, respectively.
Several small finance banks struggled, including Equitas (-80%), Ujjivan (-75%), RBL (-81%), and ESAF (-522.6%), posting significant PAT declines.
ETMarkets analysed earnings of 41 companies in the banking sector along with their CY25 returns.
Commenting on the earnings, Motilal Oswal said that most of the large private banks had seen a sequential improvement in net interest margins (NIMs) amid lower-day adjustments in 4Q, while public banks continue to see a moderation in NIMs, although calibrated at low single digits.
CY25 returns
From the returns standpoint, 19 stocks have given double-digit returns up to 35% on the year-to-date basis. The top gainers are RBL Bank, IDBI Bank and Ujjivan Small Finance Bank which have given returns of 35%, 32% and 32%, respectively.
Among the widely tracked lenders with double-digit returns are Yes Bank, Canara Bank, ICICI Bank and Axis Bank which have risen by 19%, 17%, 13% and 12%.
Stalwarts like HDFC Bank, SBI , PNB and BOB have given returns between 9% and 2%.
The laggards include PSB, Utkarsh SFB, Central Bank, Fino Payments, ESAF SFB, UCO Bank, IOB, IndusInd Bank and The Karnataka bank which have seen their price erode between 31% and 6%.
Banking gauge Nifty Bank has returned over 9% in the same period while the hearteat Nifty index has given just over 4%
Sector outlook
Bank stocks are expected to remain in focus as the Reserve Bank of India (RBI) monetary policy meeting begins on Wednesday where the Indian Central Bank is expected to slash repo rate by another 25%, making it three in a row.
Brokerage BNP Paribas India credit growth revival translating into earnings momentum. "Our prognosis for large banks is that of benign margin expansion or, at the very least, stability in 2HFY26 after a shallow bottom in 1HFY26. Thus, we expect reasonable credit growth to translate into concurrent earnings growth momentum for banks in FY26 – a key catalyst for re-ratings, in our view," it said.
Rakesh Vyas, Co-Chief Investment Officer and Portfolio Manager at Quest Investment Advisors sees RBI's measures to enhance system liquidity to support continued credit growth in FY26. As a result, despite potential margin compression, the banking sector is likely to achieve double-digit earnings growth in FY26, with asset quality remaining stable and showing no signs of significant deterioration so far, he said.
Stocks to buy
-- HDFC Bank | MOFSL/Axis Securities | Target: Up to Rs 2,250
Religare Broking has an 'Accumulate' rating on the stock for a price target of Rs 2,077
-- Buy ICICI Bank | Nuvama/Motilal Oswal |Target: Up to Rs 1,650 | Upside: 14%
-- Buy Kotak Bank | MOFSL | Target: Up to Rs 2,500 | Upside: 21%
Nuvama has a 'Hold' rating while ElaraCapital has an 'Accumulate' rating.
-- Buy Axis Bank | Nomura/Investec/Nuvama | Target: Up to Rs 1,450 | Upside: 21%
-- Buy SBI | Nuvama/MOFSL/JM Financial | Target: Up to Rs 960 | Upside: 18%
Elara has an 'Accumulate' rating on SBI shares.
-- Buy BoB | Axis Securities | Target: Rs 280
– Buy RBL Bank | Geojit Investment/MOFSL | Target: Rs 240
– Ujjivan SFB | Centrum Broking | Target: Rs 57
– Reduce IDFC First Bank | Centrum Broking | Target: Rs 59
Motilal has a buy view on AU SFB, DCB Bank, Equitas Small Finance Bank and Federal Bank. Among the PSU banks, it has a buy view on Canara Bank, Indian Bank, PNB, and Union Bank.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
Private banks dragged the overall profitability of the banking pack, delivering a 6% year-on-year decline in net profit for Q4FY25. Motilal Oswal Financial Services, in a review note, described the quarter as having “mixed” outcomes.
Among the leading banks, ICICI Bank posted the best set of numbers, recording an 18% YoY growth in profit after tax (PAT), while net interest income (NII) climbed by 11%. HDFC Bank’s bottom line increased by 7% YoY, and its NII saw a 10% uptick.
Axis Bank, SBI, and Kotak Bank reported a fall in PAT between 0.17% and 14% in the quarter under review. Meanwhile, IndusInd Bank reported a consolidated net loss of Rs 2,329 crore in Q4FY25, compared to a net profit of Rs 2,349 crore in the year-ago period, amid losses in its derivatives segment and fraud-related issues. The private lender's NII also declined 43% YoY.
Top dogs: Small banks steal the show
Dhanlaxmi Bank led the pack with a jaw-dropping 776% YoY rise in PAT, backed by a 28% increase in NII. Next in line was Bandhan Bank, which reported 482% PAT growth, even though its NII declined by 4%. Punjab & Sind Bank (PSB), Bank of India (BoI), and Punjab National Bank (PNB) delivered strong earnings growth, with PAT up 124%, 82%, and 52%, respectively.
Among small finance banks (SFBs), AU Small Finance Bank stood out with a 36% PAT rise and a robust 57% NII growth, reflecting strong operational momentum.
One of the widely tracked lenders, Yes Bank, reported a robust 63% PAT growth along with a 6% NII jump.
PSU banks Q4 key takeaways
Several public sector banks reported robust bottom-line growth despite modest NII gains. Canara Bank's PAT jumped 33%, although its NII declined by 1.4%. Union Bank, Indian Bank, and Indian Overseas Bank (IOB) reported net profit growth of 51%, 32%, and 30% YoY, while their NIIs increased by 1%, 6%, and 13%, respectively.
Several small finance banks struggled, including Equitas (-80%), Ujjivan (-75%), RBL (-81%), and ESAF (-522.6%), posting significant PAT declines.
ETMarkets analysed earnings of 41 companies in the banking sector along with their CY25 returns.
Commenting on the earnings, Motilal Oswal said that most of the large private banks had seen a sequential improvement in net interest margins (NIMs) amid lower-day adjustments in 4Q, while public banks continue to see a moderation in NIMs, although calibrated at low single digits.
CY25 returns
From the returns standpoint, 19 stocks have given double-digit returns up to 35% on the year-to-date basis. The top gainers are RBL Bank, IDBI Bank and Ujjivan Small Finance Bank which have given returns of 35%, 32% and 32%, respectively.
Among the widely tracked lenders with double-digit returns are Yes Bank, Canara Bank, ICICI Bank and Axis Bank which have risen by 19%, 17%, 13% and 12%.
Stalwarts like HDFC Bank, SBI , PNB and BOB have given returns between 9% and 2%.
The laggards include PSB, Utkarsh SFB, Central Bank, Fino Payments, ESAF SFB, UCO Bank, IOB, IndusInd Bank and The Karnataka bank which have seen their price erode between 31% and 6%.
Banking gauge Nifty Bank has returned over 9% in the same period while the hearteat Nifty index has given just over 4%
Sector outlook
Bank stocks are expected to remain in focus as the Reserve Bank of India (RBI) monetary policy meeting begins on Wednesday where the Indian Central Bank is expected to slash repo rate by another 25%, making it three in a row.
Brokerage BNP Paribas India credit growth revival translating into earnings momentum. "Our prognosis for large banks is that of benign margin expansion or, at the very least, stability in 2HFY26 after a shallow bottom in 1HFY26. Thus, we expect reasonable credit growth to translate into concurrent earnings growth momentum for banks in FY26 – a key catalyst for re-ratings, in our view," it said.
Rakesh Vyas, Co-Chief Investment Officer and Portfolio Manager at Quest Investment Advisors sees RBI's measures to enhance system liquidity to support continued credit growth in FY26. As a result, despite potential margin compression, the banking sector is likely to achieve double-digit earnings growth in FY26, with asset quality remaining stable and showing no signs of significant deterioration so far, he said.
Stocks to buy
-- HDFC Bank | MOFSL/Axis Securities | Target: Up to Rs 2,250
Religare Broking has an 'Accumulate' rating on the stock for a price target of Rs 2,077
-- Buy ICICI Bank | Nuvama/Motilal Oswal |Target: Up to Rs 1,650 | Upside: 14%
-- Buy Kotak Bank | MOFSL | Target: Up to Rs 2,500 | Upside: 21%
Nuvama has a 'Hold' rating while ElaraCapital has an 'Accumulate' rating.
-- Buy Axis Bank | Nomura/Investec/Nuvama | Target: Up to Rs 1,450 | Upside: 21%
-- Buy SBI | Nuvama/MOFSL/JM Financial | Target: Up to Rs 960 | Upside: 18%
Elara has an 'Accumulate' rating on SBI shares.
-- Buy BoB | Axis Securities | Target: Rs 280
– Buy RBL Bank | Geojit Investment/MOFSL | Target: Rs 240
– Ujjivan SFB | Centrum Broking | Target: Rs 57
– Reduce IDFC First Bank | Centrum Broking | Target: Rs 59
Motilal has a buy view on AU SFB, DCB Bank, Equitas Small Finance Bank and Federal Bank. Among the PSU banks, it has a buy view on Canara Bank, Indian Bank, PNB, and Union Bank.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
