The NIFTY Bank index on the National Stock Exchange (NSE) made headlines by reaching a new record high of 58,996 on November 17, with a significant increase of 479 points or 0.81%. This surge was supported by all twelve banking stocks that comprise the index, notably led by AU Small Finance Bank, which saw a gain of 2.5%. Other contributors included Canara Bank, Punjab National Bank, Kotak Mahindra Bank, IndusInd Bank, Axis Bank, IDFC First Bank, Federal Bank, and Bank of Baroda, all of which recorded growth ranging from 0.74% to 2.39%.
The upward trend in banking stocks can be attributed to solid performance in their second-quarter earnings for the current financial year. Private-sector banks like HDFC Bank, ICICI Bank, and Kotak Mahindra Bank reported a healthy growth in net interest income, showcasing increases between 4% to 7%. Axis Bank, on the other hand, managed a modest rise of 2% in net interest income. Meanwhile, public sector banks such as State Bank of India (SBI), Canara Bank, and Bank of Baroda experienced year-on-year growth in this facet ranging from 2% to 4%. Interestingly, public sector banks demonstrated notable profitability growth driven by lower provisioning, reaching 8.5% compared to a slight decline of 0.2% for their private sector counterparts.
In terms of net profit growth, HDFC Bank and ICICI Bank reported impressive increases of 10.5% and 5.2% year-on-year, respectively, while Axis Bank experienced a significant decline of 26%. Public sector banks, including SBI and Canara Bank, showcased a healthy net profit growth between 8% to 10%. Additionally, major public sector players reported credit growth exceeding 10% during the quarter, while leading private banks such as ICICI Bank and HDFC Bank also posted respectable credit growth figures between 9% to 12%.
In a recent analysis, leading investment bank JPMorgan shared a favorable outlook for the banking sector, suggesting that banks are reaching a critical point of growth. The firm anticipates that returns on assets (RoA) will expand alongside accelerated earnings growth over the upcoming three years. They highlighted that the second-quarter earnings signify a crucial shift in the RoA trajectory, expecting an increase in net interest margins (NIMs) and predicting an 8 basis point RoA expansion for four large private banks in the second half of the fiscal year. Furthermore, a forecasted 17% compound annual growth rate (CAGR) in net profit from FY26 to FY28 reinforces their optimistic view, attributing it to NIM improvements and favorable operating conditions amid stable asset quality.
During market hours, by 1:26 PM, the NIFTY Bank index was observed trading at 58,945, reflecting an increase of 0.74% or 428 points, effectively outperforming the NIFTY50 index, which was up by 0.3%. The positive growth trends and favorable forecasts suggest a bright outlook for the banking sector moving forward.