Earnings season disappoints as credit growth stalls, margins shrink, and optimism gives way to caution
Halfway into earnings season, Bertie was already bored. That’s rare. Even in rough macro environments, something quirky or hopeful usually pops out of the spreadsheets. But this time? Meh. He’s read dozens of analyst notes and hasn’t seen a single spark.
India’s economy might be chugging along without major hiccups, but corporate results have been lukewarm. Not weak enough to scream crisis, but not strong enough to offer comfort. Especially for someone like Bertie, who prides himself on sniffing out growth stories before they bloom. And right now, the sniff test is failing.
The beloved triangle theory hits a wall
For most of his investing life, Bertie believed in a simple visual: the triangle. One side was GDP growth, the other was banking credit growth, and the third — his favorite — was private sector banks that outpaced both.
That triangle’s been a faithful friend, a north star for allocating capital. But this quarter? The shape looks weird. Maybe even upside down.
Loan growth in the sector is crawling along. Margins? Under pressure. Profits? Not moving. The standout banks Bertie counted on — the ones with airtight risk controls and sparkling NIMs — are barely keeping up with the average.
One triangle used to map loan growth to net interest income to profit. But this time, even that trio is wobbling. No matter how Bertie slices the data, the angles don’t add up anymore.
Bertie’s not alone, but that hardly helps
On a muggy Mumbai afternoon, Bertie met his old friend Sri at a Matunga eatery. Sri’s been tracking banks for decades and knows them better than he knows his in-laws.
Between filter coffee slurps, Bertie asked, “Is this temporary?”
Sri didn’t blink. “Some of it is cyclical. Margins will bounce back a bit when deposit repricing eases.”
That wasn’t good enough.
“What about asset quality?”
Sri, slipping into sell-side mode, said, “Downside risks remain. There’s no near-term catalyst for improvement.”
The coffee didn’t taste quite right after that.
The obsession Bertie once mocked now feels all too real
There was a time when Bertie rolled his eyes at NIM-obsessed analysts, especially during central bank meetings. The types who obsessed over 5 basis point swings like their lives depended on it.
But now, in a slow-growth setup, those tiny shifts matter. A lot. Bertie suddenly finds himself scanning margin tables and loan book breakdowns — the very stuff he used to skip.
Here’s what he’s seeing:
| Metric | Q1 FY26 (Private Banks Avg.) | Q4 FY25 (Private Banks Avg.) |
|---|---|---|
| Credit Growth YoY | 10.2% | 12.8% |
| NIM (Net Interest Margin) | 3.45% | 3.68% |
| PAT Growth YoY | 6.1% | 10.5% |
| CASA Ratio | 41.5% | 42.3% |
Just a few quarters ago, banks were coasting on rate hikes and buoyant demand. Now? Their cost of funds is rising faster than their ability to lend, and sticky savings aren’t helping.
What’s hurting banks — and maybe Bertie’s confidence
It’s not one big thing dragging banks down. It’s a bunch of medium-sized headaches.
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Corporate loan demand is subdued, partly due to deleveraging
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Retail credit has slowed, especially in housing and unsecured lending
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Competition from NBFCs and fintechs is squeezing yields
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Liability side pressure hasn’t eased, with term deposit rates climbing
One sentence paragraphs make this real.
None of this spells disaster. But it does mean banks aren’t the momentum machines they used to be.
The macro isn’t broken, but it’s also not boosting
India’s GDP isn’t exactly stumbling. It’s expected to grow 6.8–7% this fiscal. That’s respectable, even admirable globally. But it’s not sparking the credit boom that used to fuel banking outperformance.
Bertie used to love quoting Credit-to-GDP charts at conferences. He’d highlight how India’s ratio was low but catching up. “Look at the room to grow!” he’d say.
That growth hasn’t vanished. But it’s no longer automatic. As financial inclusion expands and digital lending rises, old playbooks are becoming obsolete. The banks that used to benefit from inefficiencies are now competing with razor-thin fintech models.
He misses the days when outperformance was just a function of getting there first.
There’s still a path — but it’s bumpier than Bertie likes
He’s not throwing in the towel. But he’s no longer thumping the banking slide in his deck with the same confidence. The “buy below book, sell at 1.5x” wisdom from other EMs feels more relevant than ever.
Banks will bounce — they always do. But the days of double-digit credit growth with no questions asked? That might be history.
Bertie’s now looking at new metrics: cost-income ratios, retail-to-corporate exposure shifts, and digital adoption. Even NIM tracking — something he once ridiculed — is now front and center in his notes.
One-liner: Bertie’s reluctantly becoming a NIM-counter.
Maybe it’s not karmic punishment. Maybe it’s just the cycle.
As his cab rolled back to Bandra, Bertie pondered whether this was the universe’s way of humbling him for mocking those who tracked the smallest details. Maybe. Maybe not.
But even as he imagines newer triangles, he knows the game has changed.
What once felt like a sure thing now needs more questions. More doubt. More nuance. That’s not the worst thing — just not what Bertie signed up for.
