Why Is MOFSL Cautiously Optimistic On Indian Banks Despite Earnings Cuts?
Motilal Oswal Financial Services (MOFSL) has published a detailed analysis of the banking sector, highlighting sharp earnings downgrades in recent months. While margin pressure, weak loan growth, and rising credit costs have dampened near-term sentiment, MOFSL remains optimistic on medium-term growth, projecting a 17% EPS CAGR over FY26-28.
What’s Driving The Earnings Downgrades?
The steepest impact has been felt by mid-sized private banks with high exposure to the microfinance sector. Bandhan Bank, Equitas, IDFC First Bank, and RBL Bank witnessed a dramatic 41%-95% collapse in consensus earnings estimates, underlining sectoral vulnerabilities.
Which Banks Are Showing Resilience?
This divergence reflects stronger balance sheets, better liability franchises, and diversified loan books, allowing these banks to withstand sector-wide pressures more effectively.
What Is MOFSL’s Outlook?
The brokerage believes that margin stabilization, normalization of credit costs, and improved loan growth will drive the rebound. Investors may need to brace for near-term volatility but should not ignore the longer-term growth prospects of well-capitalized banks.
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