The upcoming fourth-quarter result announcements from the banking pack are unlikely to throw any major surprises.
With worst behind and a gradual recovery in macroeconomic conditions expected any big disappointment is unlikely, said analysts.
Manish Chowdhary and Sameer Bhise, analysts with IDFC Institutional Securities, said in a report that after two consecutive quarters of decline they expect an earnings growth of 6.7% on a year-on-year basis.
Also, private sector banks are expected to fare better than the public sector banks (PSBs).
An Edelweiss Securities report expects net profit for private sector banks to be in the range of 14% as compared with their PSB counterparts, which is to be 0.9% for the fourth quarter of the last financial year.
"Earnings growth for PSBs is expected to be soft due to sticky staff expenses and higher provisioning, though partially offset by improved treasury performance (more so on equity portfolio), and higher other income following sale to asset reconstruction companies. Private banks, on the other hand, are expected to deliver a steady quarter, led by benign asset quality and stable to improving net interest margins," said Nilesh Parikh, Kunal Shah and Prakhar Agarwal in a pre-earnings report.
Asset quality, a major concern for the banking sector, is likely to be under check, as per analysts. With a comparatively higher underwriting standards, private banks are unlikely to spring negative asset quality surprise.
However, they too are not completely out of the woods.
"While slippages are likely to stablise (compared with the past quarters), restructured loans continued to mount owing to a higher restructuring pipeline with the banks. The private banks too are likely to witness some stress on the asset quality though they will continue to maintain an edge over PSBs and a higher provision coverage adds to their comfort," said a report from brokerage Sharekhan.
While situation is improving, this this financial year may not be easy for banks.
"We expect fiscal 2015 to be a challenging year from both credit quality and growth perspectives. The industrial sector (accounting for half of bank credit) remains weak and is experiencing very weak pricing conditions. Consequently, problem asset generation will likely remain elevated," said Anish Tawakley, director with Barclays.
"We expect a significant proportion of restructured loans to turn NPAs as they exit moratorium periods. Capex spending is expected to remain weak, translating into restrained credit growth," he said.
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