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Banking and Financial Services
n Earnings momentum expected to slow down for PSU banks during Q4FY11 as we expect growth in the overall as well
core earnings of the banks to grow by 5.9% qoq and 5.6% qoq compared to 12.1% qoq and 12.3% qoq in Q3FY11
n The advance growth picked up pace during the quarter to 23.2%, with deposit growth also improving to 16.7% as on
March 11, 2011, resulting in 230bps expansion in CD ratio
n Q4FY11 witnessed liquidity crunch for large part of the quarter and consequently the costs have risen. However,
driven by banks’ agility to pass on the costs and 230bps expansion in CDR to restrict the compression in NIMs to just
5-15bps qoq. The NIMs still to expand on yoy basis due to low base effect
n We expect the PSU banks to report 32.6%yoy (1.1% qoq) and Private banks to report 20%yoy (3.1% qoq) growth in NII
led by strong growth in advance.
n The bond yields have hardened by 7bps and 24bps towards the long and the short end respectively. As a result,
treasury gains likely to be muted during the quarter.
n Employee expenses could rise substantially as PSU banks need to provide for the second pension liability related to
retired employees in FY11 itself . However, banks have requested the RBI for an extension and are awaiting a final
decision on the same.
n Key factors to watch out – (1) RBI decision on pension liabilities for retired employees, (2) NPAs as the banks move
to system recognized NPAs (3) restructuring in MFI books (4) signs of pick up in recoveries and upgradations
n Our top picks for the quarterly results – Axis Bank, Allahabad Bank, Bank of Baroda, Union bank of India, LICHF,
MAGFIL, Mahindra Finance and CRISIL
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Banking and Financial Services
n Earnings momentum expected to slow down for PSU banks during Q4FY11 as we expect growth in the overall as well
core earnings of the banks to grow by 5.9% qoq and 5.6% qoq compared to 12.1% qoq and 12.3% qoq in Q3FY11
n The advance growth picked up pace during the quarter to 23.2%, with deposit growth also improving to 16.7% as on
March 11, 2011, resulting in 230bps expansion in CD ratio
n Q4FY11 witnessed liquidity crunch for large part of the quarter and consequently the costs have risen. However,
driven by banks’ agility to pass on the costs and 230bps expansion in CDR to restrict the compression in NIMs to just
5-15bps qoq. The NIMs still to expand on yoy basis due to low base effect
n We expect the PSU banks to report 32.6%yoy (1.1% qoq) and Private banks to report 20%yoy (3.1% qoq) growth in NII
led by strong growth in advance.
n The bond yields have hardened by 7bps and 24bps towards the long and the short end respectively. As a result,
treasury gains likely to be muted during the quarter.
n Employee expenses could rise substantially as PSU banks need to provide for the second pension liability related to
retired employees in FY11 itself . However, banks have requested the RBI for an extension and are awaiting a final
decision on the same.
n Key factors to watch out – (1) RBI decision on pension liabilities for retired employees, (2) NPAs as the banks move
to system recognized NPAs (3) restructuring in MFI books (4) signs of pick up in recoveries and upgradations
n Our top picks for the quarterly results – Axis Bank, Allahabad Bank, Bank of Baroda, Union bank of India, LICHF,
MAGFIL, Mahindra Finance and CRISIL
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