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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
BANKING & NBFCS
Outlook: Positive
q During Q4FY11, core income for Banks & NBFCs under our coverage we
expected to register a robust growth of 24.6% (YoY). Our banking universe
is likely to grow faster with 27.6% growth (Public: 30.6%, Pvt:
20.0%); whereas NBFCs are likely to grow at 20.9%. Net profit growth is
likely to be much stronger (31.8% YoY) aided by low base - private banks
are expected to deliver 36.0% growth; PSU banks would see a 28.8%
growth in earnings.
q Credit growth has picked up to 21.5% (YoY) as on March 25, 2011 vs.
17.0% witnessed a year ago. Deposit mobilization has also improved to
16.0% during the same the period. Although last fortnight of FY11 saw
sharp rise in loan growth in absolute terms, high base of last year
wedged the overall credit growth number (23.4% YoY as on March 11,
2011); however, this number is still higher than 20% projected by the
RBI.
q We expect 10-20 bps compression in NIM during Q4FY11 (QoQ) on back
of lagged impact of deposit re-pricing at higher rates. However, this
would be partly compensated by the recent hike in lending rates as assets
are re-priced faster than the deposits. Banks are likely to witness
improvement in their NIMs on YoY basis due to low base in Q4FY10.
Going forward, we do not foresee any significant pressure on the margins
as we believe FD rates have peaked and recent softening in short
term CD rates is likely to aid in sustaining healthy NIMs.
q We expect asset quality deterioration to stabilize during Q4FY11. PSU
banks are likely to report slightly higher slippages with the shift to system-
based NPA recognition. However, strong recoveries & upgradation
are likely to cushion from any sharp rise in overall NPAs. At the other
end, private sector banks would further witness improvement in their
asset quality leading to lower credit costs.
q 10-Yr G-Sec yield remained flat during the Q4FY11. Hence, we do not
expect any significant MTM depreciation hit on the Investment portfolio
for banks under our coverage. We expect moderate growth in non-interest
income for banks under our coverage due to muted treasury profit
along with lower 3rd party distribution income.
q Top Picks: ICICI bank, Axis Bank, SBI, BoB, Allahabad Bank, J&K Bank
Core income expected to register a robust growth; net income
growth to be much stronger
During Q4FY11, core income for Banks & NBFCs under our coverage are expected to
register a robust growth of 24.6% (YoY). Our banking universe is likely to grow
faster with 27.6% growth; whereas NBFCs are likely to grow at 20.9%.
Net profit growth is likely to be much stronger (31.8% YoY) aided by low base -
private banks are expected to deliver 36.0% growth; PSU banks would see a 28.8%
growth in earnings.
In terms of Net Interest Income (NII), public sector banks under our coverage are
likely to report 30.6% growth higher than the 20.0% growth expected for the private
sector banks. However, in terms of net profit, we expect private sector banks
under our coverage universe to deliver a robust earning growth of 36.0% as against
slightly moderate growth (28.8% YoY) expected for PSU banks due to lower treasury
profit and higher provisions.
We expect Allahabad Bank, IOB and SBI to deliver relatively better numbers in our
PSU banking space. Similarly in private banking universe, we expect Axis bank,
HDFC bank and ICICI bank to deliver better bottom line growth.
Credit growth to remain strong
Credit growth has picked up to 21.5% (YoY) as on March 25, 2011 vs. 17.0% witnessed
a year ago. Deposit mobilization has also improved to 16.0% during the
same the period. Although last fortnight of FY11 saw sharp rise in loan growth in
absolute terms, high base of last year wedged the overall credit growth number
(23.4% YoY as on March 11, 2011); however, this number is still higher than 20%
projected by the RBI.
We expect loan to grow at 20%+ during FY12 on back of improvement in business
confidence which is likely to translate into higher capex demand. Currently banks
have funded this growth by liquidating their SLR and MF investments. However,
going forward, deposit growth is likely to calibrate the loan growth.
NIM to slightly compress sequentially; however to improve YoY
During Q4FY11, we expect 10-20 bps (QoQ) compression in NIM for the banking
system as a whole (again depending on the CASA mix or liability franchise of the
individual banks) on back of lagged impact of deposit re-pricing at higher rates.
However, this would be partly compensated by the recent hike in lending rates as
assets are re-priced faster than the deposits. Banks are likely to witness improvement
in their NIMs on YoY basis due to low base in Q4FY10.
Going forward, we do not foresee any significant pressure on the margins as we
believe FD rates have peaked and recent softening in short term CD rates is likely to
aid in sustaining healthy NIMs.
Treasury gains likely to be muted
10-Yr G-Sec yield remained flat during the Q4FY11. Hence, we do not expect any
significant MTM depreciation hit on the Investment portfolio for banks under our
coverage. We expect moderate growth in non-interest income for banks under our
coverage due to muted treasury profit along with lower 3rd party distribution income.
Asset quality to stabilize; PSU banks to witness higher slippage
while Pvt banks to see improvement
We expect asset quality deterioration to stabilize during Q4FY11. PSU banks are
likely to report slightly higher slippages with the shift to system-based NPA recognition.
However, strong recoveries & upgradation are likely to cushion from any sharp
rise in overall NPAs. Hence, we are expecting stable gross NPA with some negative
bias.
On the other hand, we have seen NPA formations in retail segment have reduced.
Therefore, we are expecting private sector banks to report further improvement in
their asset quality leading to lower credit costs.
Higher pension provisioning might impact earning estimates of
few PSU banks
In our view, earnings for few PSU banks might get impacted during Q4FY11 due to
higher operating expenses. This is on back of RBI guidelines released in Feb 2011,
when it has asked banks to fully provide for second pension option liability for the
retired employees. However, Central Bank has allowed these banks to amortize the
pension and gratuity liability for existing employees over five years starting FY11. In
our view, this does not mean increase in overall provisions. This would result into
lower future liability by the same amount for these banks.
Top Picks
ICICI bank, Axis Bank, SBI, BoB, Allahabad Bank, J&K Bank
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
BANKING & NBFCS
Outlook: Positive
q During Q4FY11, core income for Banks & NBFCs under our coverage we
expected to register a robust growth of 24.6% (YoY). Our banking universe
is likely to grow faster with 27.6% growth (Public: 30.6%, Pvt:
20.0%); whereas NBFCs are likely to grow at 20.9%. Net profit growth is
likely to be much stronger (31.8% YoY) aided by low base - private banks
are expected to deliver 36.0% growth; PSU banks would see a 28.8%
growth in earnings.
q Credit growth has picked up to 21.5% (YoY) as on March 25, 2011 vs.
17.0% witnessed a year ago. Deposit mobilization has also improved to
16.0% during the same the period. Although last fortnight of FY11 saw
sharp rise in loan growth in absolute terms, high base of last year
wedged the overall credit growth number (23.4% YoY as on March 11,
2011); however, this number is still higher than 20% projected by the
RBI.
q We expect 10-20 bps compression in NIM during Q4FY11 (QoQ) on back
of lagged impact of deposit re-pricing at higher rates. However, this
would be partly compensated by the recent hike in lending rates as assets
are re-priced faster than the deposits. Banks are likely to witness
improvement in their NIMs on YoY basis due to low base in Q4FY10.
Going forward, we do not foresee any significant pressure on the margins
as we believe FD rates have peaked and recent softening in short
term CD rates is likely to aid in sustaining healthy NIMs.
q We expect asset quality deterioration to stabilize during Q4FY11. PSU
banks are likely to report slightly higher slippages with the shift to system-
based NPA recognition. However, strong recoveries & upgradation
are likely to cushion from any sharp rise in overall NPAs. At the other
end, private sector banks would further witness improvement in their
asset quality leading to lower credit costs.
q 10-Yr G-Sec yield remained flat during the Q4FY11. Hence, we do not
expect any significant MTM depreciation hit on the Investment portfolio
for banks under our coverage. We expect moderate growth in non-interest
income for banks under our coverage due to muted treasury profit
along with lower 3rd party distribution income.
q Top Picks: ICICI bank, Axis Bank, SBI, BoB, Allahabad Bank, J&K Bank
Core income expected to register a robust growth; net income
growth to be much stronger
During Q4FY11, core income for Banks & NBFCs under our coverage are expected to
register a robust growth of 24.6% (YoY). Our banking universe is likely to grow
faster with 27.6% growth; whereas NBFCs are likely to grow at 20.9%.
Net profit growth is likely to be much stronger (31.8% YoY) aided by low base -
private banks are expected to deliver 36.0% growth; PSU banks would see a 28.8%
growth in earnings.
In terms of Net Interest Income (NII), public sector banks under our coverage are
likely to report 30.6% growth higher than the 20.0% growth expected for the private
sector banks. However, in terms of net profit, we expect private sector banks
under our coverage universe to deliver a robust earning growth of 36.0% as against
slightly moderate growth (28.8% YoY) expected for PSU banks due to lower treasury
profit and higher provisions.
We expect Allahabad Bank, IOB and SBI to deliver relatively better numbers in our
PSU banking space. Similarly in private banking universe, we expect Axis bank,
HDFC bank and ICICI bank to deliver better bottom line growth.
Credit growth to remain strong
Credit growth has picked up to 21.5% (YoY) as on March 25, 2011 vs. 17.0% witnessed
a year ago. Deposit mobilization has also improved to 16.0% during the
same the period. Although last fortnight of FY11 saw sharp rise in loan growth in
absolute terms, high base of last year wedged the overall credit growth number
(23.4% YoY as on March 11, 2011); however, this number is still higher than 20%
projected by the RBI.
We expect loan to grow at 20%+ during FY12 on back of improvement in business
confidence which is likely to translate into higher capex demand. Currently banks
have funded this growth by liquidating their SLR and MF investments. However,
going forward, deposit growth is likely to calibrate the loan growth.
NIM to slightly compress sequentially; however to improve YoY
During Q4FY11, we expect 10-20 bps (QoQ) compression in NIM for the banking
system as a whole (again depending on the CASA mix or liability franchise of the
individual banks) on back of lagged impact of deposit re-pricing at higher rates.
However, this would be partly compensated by the recent hike in lending rates as
assets are re-priced faster than the deposits. Banks are likely to witness improvement
in their NIMs on YoY basis due to low base in Q4FY10.
Going forward, we do not foresee any significant pressure on the margins as we
believe FD rates have peaked and recent softening in short term CD rates is likely to
aid in sustaining healthy NIMs.
Treasury gains likely to be muted
10-Yr G-Sec yield remained flat during the Q4FY11. Hence, we do not expect any
significant MTM depreciation hit on the Investment portfolio for banks under our
coverage. We expect moderate growth in non-interest income for banks under our
coverage due to muted treasury profit along with lower 3rd party distribution income.
Asset quality to stabilize; PSU banks to witness higher slippage
while Pvt banks to see improvement
We expect asset quality deterioration to stabilize during Q4FY11. PSU banks are
likely to report slightly higher slippages with the shift to system-based NPA recognition.
However, strong recoveries & upgradation are likely to cushion from any sharp
rise in overall NPAs. Hence, we are expecting stable gross NPA with some negative
bias.
On the other hand, we have seen NPA formations in retail segment have reduced.
Therefore, we are expecting private sector banks to report further improvement in
their asset quality leading to lower credit costs.
Higher pension provisioning might impact earning estimates of
few PSU banks
In our view, earnings for few PSU banks might get impacted during Q4FY11 due to
higher operating expenses. This is on back of RBI guidelines released in Feb 2011,
when it has asked banks to fully provide for second pension option liability for the
retired employees. However, Central Bank has allowed these banks to amortize the
pension and gratuity liability for existing employees over five years starting FY11. In
our view, this does not mean increase in overall provisions. This would result into
lower future liability by the same amount for these banks.
Top Picks
ICICI bank, Axis Bank, SBI, BoB, Allahabad Bank, J&K Bank
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