BFSI Sector Set for Double-Digit Earnings Growth from FY27: MOSL Report

• Indian BFSI sector poised for gradual recovery after a challenging FY26, driven by improving earnings visibility and structural tailwinds.
• FY26 characterized by macro volatility, margin pressures, and weak loan growth, yet 21 stocks in MOSL's coverage delivered over 25% returns.
• BFSI market cap expanded by ~18% in a year, reaching INR108t in 2026, fueled by PSU banks, NBFCs, fintechs, and technological shifts.
• Earnings estimates saw downgrades due to margin pressure and weak loan growth, but stabilization signs are emerging with improved collection efficiencies.
• MOSL projects FY26 as the earnings cycle trough at 5% YoY, with a rebound to 16-17% in FY27-28, and private banks growing at 20%.

Key Questions Answered

How will BFSI sector stabilization impact the economy?

The stabilization of the BFSI sector is expected to drive better sector performance and double earnings growth from FY27 onwards.

What drives the expected earnings rebound post-FY26?

The expected earnings rebound post-FY26 is driven by the stabilization of the BFSI sector, easing credit costs, stabilizing margins, and a pickup in loan growth.

Will private banks outperform other financial institutions?

Analyst Rikin suggests large private banks offer a favourable risk-reward compared to PSU banks. Private banks may face a 4-6% earnings cut, while PSU banks could see an 8-10% cut.