Indian Banks Poised for Earnings Rebound: Goldman Sachs Sees 17% YoY Growth

Indian banks are nearing a cyclical turnaround, according to Goldman Sachs. The financial sector is showing initial signs of operational recovery, driven by healthy GDP growth, improved liquidity from RBI measures, and easier funding conditions.

The report highlights that core Pre-Provision Operating Profit (PPoP) growth for Indian banks is expected to accelerate to approximately 17% year-on-year over FY26-FY29E. This represents a sharp reversal from the moderate earnings observed over the past few years.

Steady loan growth of around 14%, a 10 basis points recovery in net interest margins (NIM) from an FY27 trough, and benign asset quality are underpinning this projection. The report notes that structural headwinds across the sector appear fully factored into current market multiples.

Private bank valuations have dropped near 15-year lows, falling below levels seen during the COVID-19 pandemic. Goldman Sachs considers them attractive compared to regional Asian peers.