Indian Banks Poised for Earnings Rebound: Goldman Sachs

Indian banks are likely to see a cyclical turning point in their earnings growth, according to Goldman Sachs. The investment bank projects core pre-provision operating profit (PPoP) growth of around 17.5% annually between FY26 and FY29.

This marks a significant shift from the subdued earnings growth seen in recent years. The improvement is expected to be driven by loan growth of about 14%, a 10-basis-point recovery in net interest margins (NIMs) from their projected FY27 trough, and relatively benign asset quality, despite near-term macroeconomic and geopolitical risks.

Goldman Sachs points to early indicators showing an improvement in operating conditions for the financial sector. The investment bank's proprietary GS India Banks Leading Indicator suggests a gradual improvement underpinned by healthy GDP growth, improved liquidity from RBI measures, and easier funding conditions.