Expectations are muted heading into the season. Loan growth looks soft, net interest margins feel the lagged impact of policy easing and deposit costs remain sticky. Add seasonally higher opex and normalised credit costs, and the consensus points to flattish profitability for many large lenders.

The moving parts are well known. Margins compress when asset yields reset faster than deposit repricing, especially where fixed-rate retail books dominate. Rate cuts help borrowers but feed through to banks with a lag, and liquidity conditions determine how quickly pass-through happens. On growth, corporate demand has pockets of strength but broad acceleration has not arrived. Retail remains the anchor, yet competitive intensity caps pricing power in several products.

What to watch in prints. NIM trajectory versus guided troughs, deposit growth and granular mix of CASA to term, fee income from payments and distribution, and cost-to-income discipline. Asset quality should stay stable for top-tier banks, but watch slippages in small business and micro segments. Provision buffers and write-back behaviour will colour the credit-cost view for H2.

The path forward can improve. Many houses expect NIMs to bottom around Q2 with a modest lift into H2 as deposit repricing stabilises and growth picks up post-festive. If liquidity conditions ease and risk appetite returns, loan growth can re-accelerate in corporate working capital and SME. That said, the recovery is likely uneven across banks depending on liability franchises and product mix.

Positioning. Investors may prefer franchises with strong low-cost deposit bases, diversified fee engines and proven cost control. Names more levered to unsecured retail could face a higher bar on provisioning commentary. PSU banks with cleaner balance sheets and improving credit costs remain in the conversation, but delivery on margins is the swing factor.

One caution. If commentary implies that competitive pricing will extend the margin trough into Q3, earnings upgrades move further out. In that scenario, the relative safety of top-tier private banks with durable deposit franchises stands out.

 

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