The report highlights that, despite short-term challenges, both public and private sector banks are poised for long-term growth, with public sector banks showing stronger year-on-year (YoY) growth, while private sector banks are expected to maintain steady profitability.
The report projects that PSBs' Profit After Tax (PAT) will decrease by 0.6 percent quarter-on-quarter (QoQ) but will still post a significant 17.2 percent growth on a YoY basis. This modest decline in profitability compared to the previous quarter is largely attributed to flat net interest margins (NIMS) and a slight increase in loan loss provisions (LLP). PSBS' Net Interest Income (NII) is expected to increase by around 6 percent YoY, but NIMs are likely to remain under pressure, constraining short-term profitability.
"We estimate PSBs to report moderate earnings growth of 17.2 percent YoY and a decline of 0.6 percent QoQ in 2QFY25," the report from Motilal Oswal stated.
Despite these near-term headwinds, the report emphasizes that public sector banks are positioned for sustained long-term growth.
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