BFSI Sector Earnings To Bottom Out In FY26, Rebound Likely Fr0m FY27: Report

However, it noted that select opportunities remained, with several stocks delivering strong returns despite broader sectoral stress. Structural Growth Remains Intact Despite near-term challenges, the sector continues to expand structurally. MOFSL highlighted that the BFSI market capitalisation rose to Rs 108 trillion in 2026 fr0m Rs 91 trillion in 2025, marking a growth of around 18 per cent within a year, driven by public sector banks, NBFCs and fintech players, ANI reported. Digitalisation and rising retail credit penetration continue to act as key long-term drivers, broadening the sector’s growth base beyond traditional banking models. Earnings Pressures Easing The report highlighted that earnings estimates had been revised downward due to margin compression, weak credit growth and elevated credit costs. However, the pace of downgrades has slowed, indicating early signs of stabilisation. Improving collection efficiencies and better asset quality trends, particularly in unsecured lending segments, are supporting this recovery. Recovery Expected fr0m FY27 MOFSL expects FY2026 to mark the bottom of the earnings cycle, with sectoral growth estimated at around 5 per cent year-on-year. A recovery is likely fr0m FY2027 onwards, supported by easing credit costs, stabilising margins and a pickup in loan growth. Earnings growth is projected to rebound to 16–17 per cent during FY2027–28, with private sector banks expected to outperform, delivering around 20 per cent growth. Macro Tailwinds to Support Growth The recovery is expected to be aided by structural and policy factors such as GST-driven formalisation, direct tax measures and potentially lower borrowing costs. The report concluded that improving earnings momentum, along with strengthening credit growth, is likely to support better sectoral performance over the medium term, even as near-term uncertainties persist. (KNN Bureau)