Core Viewpoint - Indian banks are expected to report muted earnings and loan growth for the September quarter, reflecting a slowdown in both retail and corporate segments over the past two quarters [7]. Loan and Deposit Growth - Analysts estimate system-wide loan and deposit growth at around 9-10% [6][7]. - The largest State Bank of India is expected to have a loan growth of 11% in Q2FY26, down from 15.3% a year ago, while deposits for SBI are seen growing 9.1% in the September quarter, unchanged from the previous year [7]. - HDFC Bank's advances rose 9.9% year-on-year to ₹27.69 lakh crore at the end of September, while deposits grew 12.1% to ₹28 lakh crore [7]. Net Interest Margin (NIM) - NIM is expected to decline around 10 basis points sequentially in Q2FY26 for most banks, with expectations of NIM at 2.4% for SBI in Q2, down from 2.7% a year ago [6][7]. - HDFC Bank's NIM is projected to compress to 3.1% from 3.3% in the year-ago period [7]. - NIMs are expected to contract by 4-18 basis points in the September quarter as the full effect of repo rate cuts in June comes into play [6][7]. Profit After Tax (PAT) - For the banking system, IIFL Capital expects PAT to de-grow by 11% year-on-year due to NIM contraction, lower trading gains, and operating expense pick-up [6][7]. - SBI's profit after tax is expected to slow down to ₹15,230 crore in Q2, from ₹18,330 crore a year ago [7]. - HDFC Bank's PAT is expected to grow to ₹16,400 crore versus ₹16,800 crore in the year-ago period [7]. Treasury Gains and Operating Expenses - Treasury gains are likely to be weaker due to rising bond yields, which will weigh on valuations [6][7]. - A pick-up in operating expenses is expected, with growth likely to remain contained at 8% year-on-year, but a higher quarter-on-quarter increase is anticipated for certain banks [6][7]. Asset Quality and Credit Costs - Asset quality trends, particularly in the SME and commercial vehicle segments, will remain key areas to watch [7]. - Unsecured retail stress shows early signs of easing, but challenges persist in cyclical sectors like commercial vehicle loans and MSMEs, with credit costs expected to normalize in the second half of FY26 [7].