BANKING SECTOR analysis from 2016 to 2025

What’s happening in Banking Sector? 

• Yes Bank got Japanese Investor (Japanese investors are very conservative and come for long play only) 

• IDFC First Bank approved Preferential issue of equity shares to Warburg Pincus LLC 

• IDBI Bank talks for divestment picking up pace and intendant to be done in FY26 

• Bank Nifty rising steadily from March mid around 47800 levels regularly showing resilience 

• RBI gave Bazooka push with 50 bps cut and 100 bps CRR cut. 

Study from FY16 to FY25 

• Net Loans and Advances rose with a CAGR of 9.8% from FY16 to FY25 

• Last 4 years we have back to back seen growth of double and FY25 had seen lot of uncertainties inspite that growth slowed but still clocked 10%+. (FY22 to FY24 YoY growth has been rising ) 

• 100 bps reduction in Repo rate in last 6 months with Rural performing good and outlook is better due to expected monsoon, urban picking up , Tax cut benefit start flowing in ….good growth in Advances would be anyone’s guess. 

• Credit card payments from FY16 to FY25 surged 8.8x with 25%+ growth in FY22/FY23/FY24 and in FY25 slowed down to 15.3% as unsecured pain kicked in and which is likely to end max in Q2FY26 

• Personal loan in overall Gross bank credit taking up Lions share from just 20.9% in FY16 to now as high as 32.6% and probably that made RBI cautious too in FY25. 

    The spurt is such that from FY16 to FY25 YoY share has been rising. 

    Personal loan growth is eating up share from Industry share which has seen exact opposite scenario         where share keep on reducing from 41.1% in FY16 to 21.6% in FY25 

• Just from FY20 to FY25 bank’s Profitability rose from 0.11 lakh cr to 3.7 lakh cr when Average Repo rate have seen fall and rise and again fall. 

• Average Repo rate also fell from FY16 to FY18 by 75 bps and as fall was gradual Banking NIM’s was overall stable. 

• This time cut is swift and bigger so NIMs will come under pressure in 1HFY26 clearly but what awaits after that with RBI Governor saying wanted to give market stability indicating Repo rate stability likely and hence 2HFY26 NIM’s will likely bounce back. 

• Consider a scenario were Advances have again picked up pace for the reasons already discussed, with NIMs getting stable in 2HFY26 what we could see is quality growth in Advances Book and PAT in coming years. 

• Also the most important factor need to be highlighted is our GNPA/NNPA are at lowest levels from FY16 to FY25 so asset quality is also not a concern. 

• Having said all of the above Bank Nifty P/B is at the second lowest levels from Fy16 to FY25 so valuation comfort clearly present. 

• Summing up all Pointers Advances spurt , NIMs stable, Rising PAT, Asset Quality not a concern, Retail Loan will pick up pace due to Rate cut, Tax Advantage with Rural doing good with expected good monsoon and urban picking up and Valuation well within comfort we could say 

    BANKING SECTOR CURRENTLY SINGING MELODY FOR COMING YEARS

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