Hardening bond yields to weigh on bank profits in September quarter

Hardening bond yields are expected to slow down the profit growth of Indian banks in the September quarter. This is because higher bond yields make it more expensive for banks to borrow money, reducing their profit margins. As a result, despite a forecasted 11.5% rise in net interest income for Nifty 50 banks, their net profits are expected to grow more slowly at around 10%. This could temper the strong profit growth of leading banks like Axis Bank and Kotak Mahindra Bank.

Why it matters

The forecasted rise in net interest income could lift investor sentiment and pull in foreign capital. However, the slower growth in net profits may offset some of the gains.

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