Q4FY26 Bank preview: Robust credit growth; improved asset quality; what to expect from banks

The Q4FY26 season will kickstart from today with TCS announcing its quarterly and full-year results after market hours. Investors now turn their focus towards earnings as the West Asia crisis went into de-escalation mode. The result season for the IT sector will start from today, while the banking sector results will start next week from 18 April with HDFC Bank, ICICI Bank releasing their Q4FY26 results. The sector witnessed sharp correction in the recent selloff in the market, with key leading banks correcting up to 25%. Amid the correction, investors are now focusing on the quarterly and full year results to look out for opportunities. Here is what to expect from the banking sector

Robust Q4 business updates

The early trends from the Q4 business updates suggest strong all round double digit growth for all leading private and public sector banks. The private banks witnessed credit growth at 12-16% for major banks like HDFC Bank, Axis Bank, Kotak Mahindra Bank, Yes Bank and others. Public sector banks outperformed its private peers in lending for the period ending March, 2026. Bank of Maharashtra saw a over 20% YoY jump in credit offtake for the quarter, highlighting the trend in the sector, while other public sector banks like Bank of India, Union Bank and Bank of Baroda also posted 10-18%growth in credit.

According to the latest RBI report, the scheduled commercial bank’s credit growth rose by 13.8% YoY. The growth was largely driven by the MSME segment at 19%, followed by the corporate and retail segment at 14% YoY.

Net interest margins to remain in range

The net interest margins are expected to remain stable with no major changes after December rate cuts. Majority of the banks have passed on the rate cut benefits to the customers and repriced the term deposit rates, which could lead to stable margins for the quarter. Additionally, public sector banks could report better margin profiles as deposit growth continued to outpace the credit growth leading to improved and favourable credit/deposit ratio for the banks. However, the guidance for loan growth and NIMs will be key monitorables during the post-earnings commentary.

Asset quality improvement

The asset quality of the scheduled commercial banks have maintained their streak of consistent improvement over the previous quarters. According to RBI’s latest report, the overall GNPAs for the banks have improved to 2% vs 2.5% earlier in the same period. However, commentary on the outlook on asset quality in the midst of the Middle East war will be closely monitored. Analysts expect portfolios with MSMEs and corporates with export exposure could see some pain in the near-term, owing to supply chain disruptions caused by war.