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Loan growth for non-banking financial companies (NBFCs) is expected to remain steady in the first quarter of FY26, rising by 19 per cent compared to the same period last year, and 4 per cent over the previous quarter, according to a recent report by Morgan Stanley.
This pace is similar to the 19 per cent annual growth reported in the fourth quarter of FY25. The report stated "On NBFCs, we expect aggregate loan growth to remain stable at +19 per cent YoY, +4 per cent QoQ (+19 per cent in 4Q) in 1QF26". The report also expects net profit for these lenders to grow by 15 per cent year-on-year in the June quarter, up from 5 per cent in the March quarter. The growth is partly due to gains from capital raising activities and a turnaround in profits of a few players who had posted losses in the previous quarter. Even after adjusting for one-time gains, underlying profit growth is likely to be around 18 per cent year-on-year, higher than 11 per cent growth seen in the previous quarter. This improvement is largely because the base of the June 2024 quarter was weak due to higher credit costs and lower margins. In the life insurance space, the report noted that some companies are better placed than others due to stronger growth in annual premium equivalent (APE) in April and May 2025. The forecast includes around 9 per cent and 6.5 per cent growth in APE in June for the stronger performers. Meanwhile, another key player would need at least 9.5 per cent APE growth in June just to meet its flat quarterly estimate, following weak trends in the first two months of the quarter. Growth in value of new business (VNB) is also expected to vary. Some insurers are likely to see double-digit growth, supported by rising demand for non-participating guaranteed products after recent interest rate cuts. However, others may report flat margins, with outcomes hinging on June performance. In non-life insurance, the report holds off on giving forecasts due to pending company disclosures and regulatory clarity. The report added that new business growth for digital insurance distributors is expected to slow for the second straight quarter due to a high base from last year, when the segment grew over 65 per cent in the first quarter. Meanwhile, capital market-related companies are expected to post strong earnings growth, driven by buoyant market activity. However, the report warned that valuations in this segment are already high, and recommends a neutral to cautious view. (ANI)
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