RBL, Bandhan, IDFC, Equitas see 41–95% EPS cuts; what's next for mid-sized banks?

RBL Bank, Bandhan Bank, Equitas, and IDFC First Bank have faced some of the sharpest earnings downgrades over the past year, with FY26E earnings slashed between 41 per cent and 95 per cent. These mid-sized private banks, with higher exposure to unsecured retail loans and microfinance, have been the hardest hit, while larger and more diversified banks proved relatively resilient.

ICICI Bank, for instance, saw its FY26E earnings inch up 1 per cent, and HDFC Bank experienced a modest 9 per cent decline. Among public sector banks, Indian Bank received a slight 3 per cent upgrade, whereas BOB, SBI, Union Bank, and PNB recorded cuts ranging from 8 per cent to 15 per cent. MOFSL attributed the broad-based downgrades to concerns over retail credit stress, margin pressures, rising credit costs, and slower-than-expected loan growth.

Private banks as a group have borne the brunt, with aggregate FY26 profits estimates were reduced by 14 per cent over the past year, compared with just 8 per cent for PSBs. FY27E estimates for private lenders have also been trimmed by 9 per cent, versus a 6 per cent downgrade for PSBs. 

Lenders focused on unsecured loans were particularly affected—IDFC First Bank fell around 41 per cent, IndusInd Bank 73 per cent, Bandhan 46 per cent, RBL Bank 43 per cent, Equitas SFB SFB 95 per cent, and SBI Cards around 31 per cent. By contrast, banks with secured loan dominance, diversified portfolios, and conservative underwriting, such as HDFC Bank and ICICI Bank, have maintained relative stability.

MOFSL said its earnings estimates largely align with consensus, showing minor deviations of 1 per cent for FY26E and 3 per cent for FY27E at the aggregate level. 

At the stock level, MOFSL is slightly more optimistic for RBL Bank, DCB Bank, and IDFC First Bank, expecting FY27E earnings to outperform consensus by 17 per cent, 13 per cent, and 4 per cent, respectively, driven by stable margins and credit cost normalisation.

Despite pockets of optimism, risks remain. Funding cost pressures, slower deposit repricing, or increased wholesale borrowing could limit margin improvements. Asset quality concerns in unsecured retail, microfinance, and cyclical segments like commercial vehicles persist. Extended rate cut cycles, regulatory changes, or global shocks could further challenge near-term earnings, making recovery uneven for the sector.