Bank Stocks In Focus Ahead Of Q1 Results: Bank of Maharashtra, Indian Bank Gain As PSU Banks Enter Earnings Season On Strong Credit Growth

Public sector bank stocks were in focus on Friday, July 10, as the June-quarter earnings season got underway, with Bank of Maharashtra and Indian Bank set to announce their financial results later in the day.

Bank of Maharashtra climbed as much as 2.13% to ₹83.76 on the NSE in morning trade, while Indian Bank gained nearly 2% to ₹807.50. The gains came after business updates from several state-owned lenders showed credit demand remained healthy during the first quarter of FY27.

Loan growth stays strong, deposits lag across PSU banks

Provisional business updates indicate that public sector banks started the new financial year on a steady note. Loan books continued to expand at a healthy pace, although deposit growth remained relatively slower, reflecting the funding pressure that has persisted across the banking system.

Data compiled by PTI from disclosures made by nine state-owned lenders showed advances growing between around 12% and 29% year-on-year during the quarter ended June 30. Deposit growth, by comparison, ranged from 3.5% to 16%.

Among the larger lenders, Bank of Baroda reported a 17.4% increase in global advances, while deposits grew 13.8%. Bank of India's loan book expanded 18.64% against deposit growth of 14.92%. Punjab National Bank recorded a 12.85% rise in advances, with deposits increasing 8.5%.

Canara Bank's advances grew 18% year-on-year, while deposits rose 11.7%. Indian Bank reported 13.9% growth in loans and a 13.3% increase in deposits.

Central Bank of India posted the fastest loan growth among the banks that released updates, with advances rising 28.8% over the year-ago period. UCO Bank reported loan growth of 21.3%, while Punjab & Sind Bank recorded a 19.5% increase.

Union Bank of India remained an outlier on the deposit front. Deposits grew only 3.5% year-on-year even as advances increased 12.5%.

Retail, agriculture and MSME (RAM) lending continued to support credit expansion across lenders. Canara Bank led the pack with domestic RAM advances growing 21.3%, followed by Bank of India at 19.7% and Bank of Baroda at 18.5%. Indian Bank's RAM portfolio expanded 14.8%, while Union Bank reported growth of 11.56%.

With loans continuing to outpace deposits, credit-deposit ratios moved higher across several public sector banks during the quarter.

Stable June quarter expected despite pressure on margins

A Q1FY27 banking sector preview by Kotak Neo Research points to another steady quarter for banks, with loan growth and stable asset quality expected to offset pressure on profitability arising from lower margins.

The note estimates sector-wide net interest income (NII) growth of around 9% year-on-year. Earnings, however, are expected to remain uneven across the sector. While private banks are projected to post about 11% growth in profit, PSU banks could see earnings decline by 14-15% because of a higher base and weaker treasury income.

Net interest margins are likely to remain under pressure as banks continue to rely on higher-cost term deposits to fund loan growth, even as lending rates adjust faster to policy rate cuts. That said, the note expects the pressure on margins to ease gradually over the coming quarters if deposit competition softens and FCNR inflows improve system liquidity.

The outlook on asset quality remains favourable. Corporate, retail and MSME portfolios have continued to perform well, while stress in unsecured retail and microfinance loans has moderated compared with previous quarters. Lower slippages and improving recoveries are also expected to help keep credit costs under control. Overall, management commentary is expected to remain broadly constructive during the earnings season.

FY26 provides a strong base for the new financial year

The June-quarter results come after public sector banks delivered their best-ever annual performance in FY26.

Finance Ministry data showed PSBs together reported a record net profit of ₹1.98 lakh crore during the last financial year, up 11.1% from FY25. Aggregate operating profit stood at ₹3.21 lakh crore, supported by healthy credit growth and improved asset quality.

The combined business of public sector banks rose 12.8% year-on-year to ₹283.3 lakh crore as of March 31, 2026. Deposits increased 10.6% to ₹156.3 lakh crore, while gross advances grew 15.7% to ₹127 lakh crore, underscoring sustained credit demand across the economy.

Also Read - Gold and Silver Price Today: Gold Slips on Fed Rate Outlook; Oil Extends Decline After Iran Supply Concerns Ease | Kotak Neo Commodity Watch