The June quarter (Q1 FY26) results of India’s top four private sector lenders—HDFC Bank, ICICI Bank, Axis Bank, and Kotak Mahindra Bank—are out, and they are being closely watched by market participants. Collectively, these four banks hold nearly 35% weightage in the Nifty 50 index, making their financial health and quarterly performance highly influential for the broader Indian equity markets.
These quarterly earnings give a mixed picture of strength in core profitability but also highlight emerging challenges in asset quality and provisioning. While HDFC Bank and ICICI Bank posted double-digit profit growth, Axis Bank and Kotak Mahindra Bank saw a dip in profitability. Across the board, there was a visible trend of rising NPAs, increased provisioning, and slowing NII growth, which suggest that the banking sector might be heading into a phase of cautious growth amid macroeconomic uncertainties.
Common Negative Themes Observed in Q1 FY26 Results:
Rising NPAs: All four banks reported a sequential or year-on-year increase in gross and net NPAs, reflecting emerging stress in certain segments like retail and commercial vehicle financing.
Higher Provisions: Most banks significantly increased their provisioning buffers, either due to new regulatory policies, slippages, or proactive risk management strategies.
Slower NII Growth: Except for ICICI Bank, the other three lenders showed muted or single-digit growth in net interest income, indicating pressure on loan yields or rising cost of funds.
Margin Pressure: While NIMs remained stable or strong for some, there was no major expansion in margins, hinting at increased competition and cost pressures.
HDFC Bank led the pack with a 12% year-on-year rise in net profit, which climbed to Rs 18,155 crore for the quarter ending June 2025. The bank’s net interest income (NII) also posted a modest growth of 5.4% YoY, standing at Rs 31,440 crore. HDFC Bank announced a special interim dividend of Rs 5 per equity share and declared a 1:1 bonus issue, highlighting its strong capital position. However, the asset quality saw some deterioration, with gross non-performing assets (GNPA) rising to 1.40% from 1.33% in the previous quarter, and net NPAs increasing to 0.47%. The bank’s Net Interest Margin (NIM) stood at 3.5%. A notable aspect of HDFC Bank’s Q1 results was the significant jump in provisions, which surged to ₹14,441.63 crore. This included a floating provision of ₹9,000 crore and a contingent buffer of ₹1,700 crore, suggesting a cautious stance amidst macro uncertainties.
ICICI Bank reported a robust 16% year-on-year growth in net profit, reaching ₹12,768 crore for Q1 FY26. The bank’s net interest income (NII) increased by 10.6% YoY to Rs 21,635 crore, compared to Rs 19,553 crore in the year-ago period. ICICI Bank continues to maintain a strong profitability profile, backed by better asset quality management. The NIM stood at 4.34% for the April-June quarter. On the asset quality front, the bank’s gross NPAs remained under control, while net NPAs declined slightly to 0.41% from 0.43% in the same period last year. Provisions (excluding tax) were reported at ₹1,815 crore and included a positive impact from the release of ₹389 crore in Alternative Investment Fund (AIF)-related provisions.
Axis Bank, however, posted a dip in its standalone net profit, which declined 4% YoY to ₹5,806 crore in Q1 FY26. Its net interest income showed muted growth at ₹13,560 crore, marking a marginal 1% rise YoY. The Net Interest Margin (NIM) was 3.80% for the quarter. Asset quality saw some slippages, with gross NPAs rising to 1.57% from 1.28% in the previous quarter and net NPAs increasing to 0.45% from 0.33%. The bank also reported ₹904 crore in recoveries from written-off accounts. A significant point in Axis Bank’s Q1 report was the sharp rise in provisions and contingencies, which jumped 93% sequentially to ₹3,948 crore. This surge was attributed to changes in asset classification and income recognition norms, along with higher slippages, signaling increased stress in the loan book.
Kotak Mahindra Bank posted a 7% decline in net profit on a YoY basis, with earnings dropping to Rs 3,282 crore from Rs 3,520 crore a year earlier. On the other hand, net interest income rose by 6% YoY to Rs 7,259 crore in Q1 FY26. The bank reported the highest NIM among the top four, standing at 4.65%. Despite strong margins, Kotak’s asset quality also showed pressure, with gross NPA at 1.48% and net NPA at 0.34% as of June 30, 2025. Provisions more than doubled to Rs 1,200 crore, largely due to stress in the microfinance (MFI) and retail commercial vehicle (CV) portfolios.
In summary, the top four Nifty private sector banks delivered a mixed Q1 FY26 performance. HDFC Bank and ICICI Bank maintained strong profitability, with ICICI showing a more balanced approach in asset quality and provisions. On the other hand, Axis Bank and Kotak Mahindra Bank faced earnings pressure and increased provisioning needs due to asset quality stress in select portfolios. The earnings season underlines that while top private banks continue to generate steady interest income, rising NPAs and provisioning buffers remain key factors to watch in the coming quarters.
Disclaimer
This article is for informational purposes only and should not be construed as investment advice. Please consult your financial advisor before making any investment decisions.
