Mumbai: India’s top nine private sector banks posted a combined net profit of ₹43,641 crore in the June quarter, marking a 2.7% growth, reflecting circumspect economic growth and tepid credit demand. An ET analysis showed that in the first quarter of FY25, the combined profits of these nine lenders had climbed 19% year-on-year.

Growth was hindered by sluggish credit and deposit expansion. With core business momentum remaining weak, treasury gains played a significant role in supporting profitability.

Analysts said the earnings of financial companies reflect stress across the board, especially at the less resourced end of the customer spectrum. “The sum and substance is that the economy is grappling with lower growth; there are job creation and employment issues and there is stress manifesting as financials are seeing non-performing loans,” said Suresh Ganapathy, head of financial services research, Macquarie Capital. “The stress is more in the middle-income segment and also at the bottom of the pyramid.”

Subdued performances from Axis Bank, Kotak Mahindra Bank, IndusInd Bank, RBL Bank and IDFC First Bank dragged down the overall earnings of private banks, which have been at the forefront of valuation gains in the sector and are traditional favourites of overseas funds.

HDFC Bank made treasury gains of ₹10,110 crore and transaction gains of ₹9,130 crore from the sale of a stake in HDB Financial Services that debuted on stock exchanges. ICICI Bank booked treasury gains of ₹1,241 crore, while Axis Bank booked ₹1,420 crore of gains.

“I think the real growth numbers which will impress you, I would say it is still a couple of quarters away,” Amitabh Chaudhry, MD & CEO, Axis Bank had told ET recently. Chaudhry has said the bank will grow faster than the industry this year.Kotak Mahindra Bank, which reported flat earnings growth, is also hoping to recover in the second half of the fiscal year. “There have been some speed bumps,” Ashok Vaswani, MD & CEO, Kotak Mahindra Bank told ET.“In the microfinance business, we started seeing stress in the third quarter of last year, Q1 (June quarter) we believe is the peak and Q2 will start coming down. This quarter, the retail part of commercial vehicles is clearly showing some stress.
Credit cards take a little time to turn the super tanker around.”

Yes Bank, which reported low single-digit deposit and loan growth, has said the September quarter would be the most challenging for the sector as credit growth remains sluggish and the full impact of the repo rate cut begins to flow through the system, weighing on margins.

“Q2 would be the toughest quarter for the entire banking industry, because the 50-bps rate cut would lead to repricing of the entire loan book linked to external benchmarks, though deposits will take some time to reprice,” Prashant Kumar, MD & CEO, Yes Bank told ET. “Quarter 3 onwards I think it would stabilise, if there is no further rate cut.”