Leading retail-focused lenders include State Bank of India (SBI), HDFC Ltd, HDFC Bank, IndusInd Bank and Federal Bank.
Banks having retail focus are expected post better financial results in the fourth quarter ended March 31.
Leading retail-focused lenders include State Bank of India (SBI), HDFC Ltd, HDFC Bank, IndusInd Bank and Federal Bank.
Some banks such as Bank of Baroda and Axis Bank which have provisioned for all the weak accounts following the asset quality review by the Reserve Bank of India (RBI) in the third quarter could report lower bad loans.
Vibha Batra, group head financial ratings, at a rating agency Icra, said the retail-focused banks would fare much better than those with a large infrastructure loans on their books. "On a sequential basis the fourth quarter will look much better than the preceeding quarter but on a year-on-year basis it will fare much worse. Most banks will continue to recognise and provide capital for their bad assets specially public sector banks where asset quality will be a prime concern. The high credit costs will keep profits of public sector banks muted. Credit growth in the fourth quarter was reasonable but it will not be sufficient to show up in the Net Interest Incomes of respective banks,” said Batra.
Reliance Securities said in a report that the operating performance of the banking sector is likely to remain stressed in the fourth quarter as most of the banks are likely to report decline in revenue owing to higher slippages along with multi-year low credit growth.
"We expect NIM (net interest margins) to decline sequentially as the moderation in cost of term deposits would get offset by decline in yields on loans. All major banks have reduced their base rates by 0.20%-0.40% in last six months, which will lead to negative impact on yields on funds and NIM. Further, reversal of interest income on fresh slippages will also pull down yield on fund.
The brokerage sees banks reporting a moderate NII (net interest income) growth of 2.7% over the previous year, with private banks reporting 15.9% yoy and public sector banks reporting decline of 6.3% in yoy growth.
A public sector banker said, “Treasury income will be high for most banks, especially those with high government bonds as the yields have fallen by at least 0.20% from the beginning to the end of the quarter. The fourth quarter may fare better than the preceeding one.”
Reliance Securities said, “We continue to prefer consumer business focused private banks in medium term as they are better placed to take advantage of economic cycle. Within the private sector banks, we prefer banks which have higher exposure to consumer loans as we expect retail loan demand to pick up before infrastructure/corporate loans demand rises. We prefer HDFC Bank, HDFC Ltd, IndusInd Bank and Federal Bank in private sector and SBI in public sector space.”
According to rating agency Crisil, the public sector banks should once again report a decline in NII and higher provisioning because of worsening asset quality. “Provisioning requirements of private sector banks will also balloon, resulting in net profit growth lagging NII growth. Given increased slippages from large corporate accounts, aggregate gross non-performing assets are expected to touch 7.7% of advances by the end of the current fiscal, up from an estimated 6.8% as of March 2016, Crisil said in its report.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
 "dna")
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}