Indian banks' profit rises 20 pc in Q2FY27 to Rs 1.16 lakh crore
The net profit of scheduled commercial banks (SCBs) rose 20 per cent year-on-year to Rs 1.16 lakh crore in the second quarter of FY27, driven primarily by higher net interest income and strong credit growth, a report said on Thursday.
The report from CareEdge Ratings said profit growth stemmed mainly from higher net interest income (NII), as bank credit grew about 19 per cent.
It was also supported by a relatively weak base in the year-ago quarter, when profit growth stood at just 4.2 per cent. In contrast, the first quarter of FY27 had benefited mainly from a 12.8 per cent decline in provisions.
"Treasury income fell sharply as bond yields rose during the quarter. Part of the 20 per cent growth also reflects a weak base, as profit had grown only 4.2 per cent YoY in Q2FY26," the report said.
The report noted that profit growth is likely to moderate in H2FY27 as one-time gains are likely to fade, treasury income may stay weak, and banks are likely to build provisions ahead of the move to expected credit loss (ECL) rules.
Return on assets (RoA) rose 7 bps YoY to 1.39 per cent, the highest since Q2FY25, mostly because of one-time gains. Excluding one-time items, it was broadly unchanged from a year ago.
Median return on equity (RoE) rose 79 bps YoY to 13.6 per cent. Other private banks gained the most, as lower provisions lifted their profit.
Median Common Equity Tier 1 (CET-1) ratio rose 87 bps YoY to 15.8 per cent, though it eased from Q1 FY27 in the usual second-quarter dip. Every bank is well above the regulatory requirement, the report noted.
“Core lending drove bank earnings this quarter. Operating profit grew 13-15 per cent YoY in both bank groups, so provisions explain the gap in their profit growth. Other private banks are catching up as credit costs ease,” said Vineet Jain, Senior Director, CareEdge Ratings.
“Their return on assets now trails the large private banks by about 50 bps, half the gap a year ago. Large private banks expect margins to improve after Q3FY27 as they lend out the FCNR(B) deposits. Higher provisions ahead of the ECL rules may lower returns,” Jain added.
