Private Bank's ROE Cools in FY26 Under NIM and Treasury Pressures

Private sector banks reported lower Return on Equity (RoE) in FY26 as pressure on lending margins and losses on treasury portfolios affected earnings, as per PTI reports.  

Data from investor presentations showed moderation in profitability across several lenders during the financial year. 

Banks faced a decline in net interest margins (NIMs) after lending rates adjusted more quickly than deposit rates in a softer interest rate environment. Higher credit costs during the year also weighed on earnings. 

Treasury Losses Affect Quarterly Performance 

The banking sector also saw treasury-related losses in the March quarter following a rise in yields on dated government securities towards the end of the month. The movement in bond yields resulted in mark-to-market losses on investment books held by banks. 

Deposit mobilisation remained slower than credit growth during FY26, keeping funding costs elevated for lenders. This affected overall profitability and return ratios across the sector. 

HDFC Bank, Axis Bank Report Lower RoE 

HDFC Bank reported RoE of 14.3% in FY26, compared with 14.6% in FY25 and 16.1% in FY24. Its standalone NIM stood at 3.38% in the March quarter against 3.40% a year earlier. 

Axis Bank posted RoE of 13.15% for FY26, down from 16.52% in the previous year. Domestic NIM declined to 3.73% from 4.08%, while profit after tax fell to ₹24,457 crore from ₹26,373 crore. 

ICICI Bank reported standalone RoE of 16% against 17.9% in FY25. Its NIM moderated to 4.32% in the March quarter from 4.41% a year ago. 

Smaller Lenders Also See Decline 

Kotak Mahindra Bank recorded RoE of 11.08% in FY26 compared with 12.57% in FY25. Its NIM declined to 4.67% from 4.97% in the corresponding quarter last year. 

South Indian Bank reported RoE of 12.76%, marginally lower than 12.90% in FY25. Bandhan Bank saw a sharper fall in RoE to 4.8% from 11.6%, while its interest margin declined to 6.2% from 6.7%. 

Banks are expected to continue facing pressure from deposit costs and credit expenses in FY27. 

Read More: Tata Trusts to Seek 3-Year Strategy from N Chandrasekaran to Cut Losses Ahead of Board Meet! 

Conclusion  

Lower net interest margins and treasury-related losses weighed on earnings for several private banks during FY26, leading to moderation in RoE levels. 

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