Banks are expected to report muted earnings for the first quarter of FY26 because of weak loan growth, lower margins, seasonally soft fee income, and higher slippages weigh on performance, according to a report by IIFL Capital.

The report estimates that banks' profit after tax (PAT) will decline by 2 per cent year-on-year and 4 per cent quarter-on-quarter.

It said, "We expect muted loan growth, NIM contraction, seasonally weak fee income and higher slippages to weigh on banks' 1Q PAT (-2 per cent yoy/-4 per cent qoq)."