Banks Q1 Results Preview - Earnings Growth To Moderate; Margins Bias Slightly Negative: Motilal Oswal

Motilal Oswal Report

We estimate net interest income for our banking coverage universe to grow ~12.6% YoY in Q1 FY25, while pre-provision operating profit is likely to increase at a modest rate of 9.2% YoY (-5.7% QoQ). For Q1 FY25, we thus estimate private/public sector undertaking banks to report earnings growth of 15.6%/11.5% YoY.

We also estimate the earnings of our banking universe to grow 13.7% (~10.3% excluding-HDFC Bank)/16.3%/16.6% YoY over Q1 FY25/FY25/26. Consequently, we estimate the banking sector’s earnings to post a >16% CAGR over FY24-26.

Interestingly, we believe that FY25 is going to be an inflection year as earnings growth after some period of moderation (~27% YoY growth in FY23-24) bottoms out in second half and thereafter begins to accelerate from H2 FY25.

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