New Delhi [India], August 28 (ANI): Several Indian banks are expecting their net interest margins (NIMs) to improve in the second half of the current financial year after reporting a weak performance in the April-June quarter, according to a report by S&P Global.

The earnings in the first quarter of FY26 were dragged down by a sharp reduction in interest rates.

The report highlighted that four of the top six Indian banks posted a decline in net income in the fiscal first quarter ended June 30. The fall came partly due to the Reserve Bank of India's decision to reduce benchmark interest rates by 100 basis points since the beginning of 2025.

Among the large lenders, State Bank of India (SBI) reported a net profit of 212.01 billion rupees in the April-June period, up 9.7 per cent year-on-year. ICICI Bank Ltd., the largest private sector bank by market capitalization, also reported strong earnings with a 15.9 per cent rise in profit after tax to 135.58 billion rupees.

In contrast, other major lenders, including state-run Bank of Baroda and Punjab National Bank, along with private sector peers HDFC Bank Ltd. and Axis Bank Ltd., recorded declines in net income, according to S&P Global Market Intelligence data.

Margins also came under pressure in the quarter. SBI, South Asia's biggest lender by assets, reported NIM of 2.77 per cent in the first quarter, compared with 2.99 per cent a year earlier, while maintaining its full-year guidance of about 3 per cent. HDFC Bank saw its NIM slip to 3.94 per cent from 4.06 per cent. Punjab National Bank reported NIM of 2.43 per cent against 2.76 per cent in the year-ago quarter.

On June 6, the Reserve Bank of India cut the proportion of deposits banks are required to keep as cash by 100 basis points to 3.0 per cent. This move is expected to release around 2.5 trillion rupees of liquidity into the banking system by December.

Alongside, the central bank also lowered its benchmark lending rate by 50 basis points to 5.5 per cent, adding to the 100 basis point reduction since the start of 2025 to support economic growth.

Meanwhile, some lenders reported a slight deterioration in asset quality and stepped up provisioning in the quarter. However, S&P Global noted that analysts do not anticipate any sharp increase in non-performing loans, which remain at multiyear lows. (ANI)