Weak Link

The June-ended quarter has been sluggish with banks reporting poor margins and low demand for loans

- By SALIL PANCHAL

AT A TIME WHEN THE Reserve Bank of India (RBI) is pushing for growth through several interest rates cuts, FY26's June-ended quarter has been weak for several of India's lenders. Data announced so far from banks indicate that demand for loans has been slow, margins have been poor and provisions for bad loans and slippages have increased (see chart).

After the earnings announcement, HDFC Bank and Axis Bank have been downgraded by ICICI Securities research to an 'Add' investment rating from a 'Buy', while Nuvama Institutional Equities has downgraded Axis to a 'Hold' rating, as its net interest margins (NIM) and net NPAs (nonperforming assets) for the June-ended quarter fell. Motilal Oswal Financial Services has downgraded Union Bank to a 'Neutral' rating from a previous 'Buy'.

Equirus Securities has revised the investment rating for AU Small Finance Bank to 'Add' from 'Long', HDFC Bank's and ICICI Bank's investment ratings remain unchanged at 'Long' and 'Add', respectively. Union Bank has been lowered to a 'Reduce' from 'Add' rating.

The worrisome part is that several banks could face a weak July-September quarter, where margins will continue to remain weak. It could also extend longer for some banks, before starting to improve towards the end of the calendar year, analysts say.

A TOUGHER QUARTER