Margin pressure weighs on banks' Q4

THE BANKING SECTOR'S Q4 FY25 results revealed a nuanced landscape marked by divergent growth trajectories.

- FE BUREAU

Net interest income (NII) growth slowed to 3.57%, a significant drop from 10.39% in Q4 FY24. This deceleration was also evident compared to Q3 FY25's 7.08% growth. Profit growth mirrored this trend, with a moderate 4.38% increase in Q4 FY25, a notable decline from the robust 24.89% growth in Q4 FY24 and 13.33% in Q3 FY25.

The margin pressure was anticipated, and in Q3, Bank of Baroda revised its net interest margins (NIM) guidance lower by 5 basis points (bps). For Q4, the bank reported a NIM of 2.86%, compared to 3.27% in Q4 FY24. Debadatta Chand, MD & CEO of Bank of Baroda, noted that "margin pressure would continue in Q1."

The decline in interest rates has impacted the banking sector's performance, and bankers expect NIMs to improve only from Q3 and Q4 of FY26, as deposit repricing is expected to take around 6 months.