Double-digit bank credit growth in Q4; NIM probable flats: analysts

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Banks are expected to post healthy profits for the January-March quarter (Q4FY22), as the loan portfolio is expected to grow, on average, in double digits and asset quality to remain stable. Analysts believe the quarter, which was marred by geopolitical tensions, rising bond yields and global interest rates, could see a slowdown in non-interest revenue due to cash losses and lower margins. interest rates (NIM) flattened.

“Earnings momentum should pick up, with healthy loan growth, stable margins and improving asset quality trends. are experiencing healthy growth in unsecured products, demand for working capital, SME lending and mortgage lending. Recoveries and upgrades should exceed slippages. On the expense side, operating expenses may remain elevated due to branch investments, technology and the recovery in retail volumes,” IIFL Securities analysts wrote in their earnings preview report. results.



The brokerage expects net interest income (NII), operating profit before provision (PPoP) and net profit of all banks covered by its coverage to increase by 19%, 4% and 66% year over year. Industrial lending, meanwhile, could increase by almost 13% year-on-year for banks covered by the IIFL. He expects a resumption of growth in all segments, especially for unsecured retail, SMEs and housing finance.

That said, while analysts believe forward flow into the delinquent category would likely be limited in Q4FY22, analysts expect the behavior of the ECLGS loan pool and restructured portfolio to be key to watch.


Private banks

Kotak Institutional Equities (KIE) analysts report around 21% year-on-year growth and 6% sequential NII growth for more than 10 private banks under their coverage, including Federal Bank, Axis Bank, HDFC Bank, ICICI Bank and IndusInd Bank.

PAT, or profit after tax, improves 86% YoY and 6% YoQ, led by Bandhan Bank (up 978% YoY), RBL Bank (226% YoY), ICICI Bank (64% over one year). ) and Axis Bank (51% YoY).

Loan growth, meanwhile, is expected to increase by 15% and 17% in FY22 and FY23, respectively. “We estimate ICICI Bank to deliver 16% YoY loan growth in Q4FY22, and Kotak Mahindra Bank and Axis Bank to grow 20% and 15% YoY, respectively. HDFC Bank and IndusInd Bank have already announced interim growth of 21% and 13% year-on-year, respectively,” says a report from Motilal Oswal Financial Services.

Those at Kotak warn, however, that banks could become more aggressive on loan growth, putting downward pressure on yields, which may not be fully offset by a rise in benchmark interest rates. At the same time, increasing competition for liquidity (deposits) in the market may also drive up deposit rates.

“Additionally, bond yields seem to be trending higher right now. Against the backdrop of these changes, we think bank margins could be at their highest. We wouldn’t be surprised if managements talk about margin pressure affecting NII growth in the near-medium term,” they said.


Public banks

PSBs are expected to experience continued traction in operating performance, supported by the resumption of business growth and a sustained reduction in provisions, although operating expenses may remain marginally elevated and cash performance sluggish.

Slippages, Motilal Oswal analysts said, would continue to ease, which, coupled with healthy recoveries, would bolster asset quality performance. PSBs are expected to generate NII/PPoP growth of 23%/5% YoY and 4%/9% QoQ, respectively. PAT could grow strongly to 80% YoY and over 20% QoQ in Q4FY22, led by Canara Bank (up 100% YoY), Punjab National Bank (98% YoY). year-on-year) and the State Bank of India (SBI; 66%).

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