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India Equity Research Reports, IPO and Stock News
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Expect uptick in earnings growth
During 2QFY12, we expect Indian banks to report 15% growth in profit
driven by healthy growth in operating profit. Sector loans have grown by
20% and will be a key to NII growth as YoY NIMs may be under pressure.
CASA growth would be see pressure, but margins would expand QoQ due
to hike in lending rates. Asset quality trends will be the key to watch: PSU
banks will see rise in NPLs upon switch to automated recognition, private
banks would restructure MFI loans. PSU banks may also see MTM losses
on G-Secs. Axis may surprise on upside and SBI may see uptick in profits
after two subdued quarters; forex losses would impact PFC’s earnings.
Expect healthy growth in profits
q During 2QFY12, we expect banks in our coverage to see uptick in profit growth to
15% YoY, largely driven by 18% growth in operating profit (ex-treasury).
q Banks with higher overseas loans will see faster growth due to rupee depreciation.
q We expect 17% growth in NII largely driven by growth in loans that will help to
offset some contraction in margins from last year’s levels.
q However on a sequential basis, NII growth will be driven largely by expansion in
core margins as QoQ loan growth for sector has been low.
q While CASA growth is likely to moderate, margins could expand QoQ as the hike in
lending rates has been higher than increase in deposit rates.
q Rise in G-Sec yields may result in MTM losses on the AFS portfolio, PSUs are more
vulnerable (see figure 10-12).
Asset quality is key variable
q Asset quality trends will be crucial in 2QFY12, especially for the PSU banks as most
of them reported high slippages in 1QFY12.
q Our recent conversations with private banks indicate that asset quality is faring well
(expect restructuring for MFI), but some PSU banks expect pressure to continue.
q Most PSU banks (except SBI and BOB) will transition the last 10% of loans (small
ticket loans) to automated NPL recognition system and trends from 1Q indicate that
this may lead to identification of NPLs that were classified as standard assets.
q It will also be important to watch out asset quality, slippages or restructuring, in
the infrastructure sector as select banks had faced stress even in 1Q.
Upside in Axis Bank; SBI to see uptick in profits
q Axis to report 30% profit growth led by loan growth and fall in NPL provisioning.
q SBI is likely to see uptick in profits after two consecutive subdued quarters; Union
would report a high growth on a low base.
q Infra-NBFCs are likely to see moderation in loan growth and forex losses could have
considerable impact on PFC’s profits and some impact for REC as well.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Expect uptick in earnings growth
During 2QFY12, we expect Indian banks to report 15% growth in profit
driven by healthy growth in operating profit. Sector loans have grown by
20% and will be a key to NII growth as YoY NIMs may be under pressure.
CASA growth would be see pressure, but margins would expand QoQ due
to hike in lending rates. Asset quality trends will be the key to watch: PSU
banks will see rise in NPLs upon switch to automated recognition, private
banks would restructure MFI loans. PSU banks may also see MTM losses
on G-Secs. Axis may surprise on upside and SBI may see uptick in profits
after two subdued quarters; forex losses would impact PFC’s earnings.
Expect healthy growth in profits
q During 2QFY12, we expect banks in our coverage to see uptick in profit growth to
15% YoY, largely driven by 18% growth in operating profit (ex-treasury).
q Banks with higher overseas loans will see faster growth due to rupee depreciation.
q We expect 17% growth in NII largely driven by growth in loans that will help to
offset some contraction in margins from last year’s levels.
q However on a sequential basis, NII growth will be driven largely by expansion in
core margins as QoQ loan growth for sector has been low.
q While CASA growth is likely to moderate, margins could expand QoQ as the hike in
lending rates has been higher than increase in deposit rates.
q Rise in G-Sec yields may result in MTM losses on the AFS portfolio, PSUs are more
vulnerable (see figure 10-12).
Asset quality is key variable
q Asset quality trends will be crucial in 2QFY12, especially for the PSU banks as most
of them reported high slippages in 1QFY12.
q Our recent conversations with private banks indicate that asset quality is faring well
(expect restructuring for MFI), but some PSU banks expect pressure to continue.
q Most PSU banks (except SBI and BOB) will transition the last 10% of loans (small
ticket loans) to automated NPL recognition system and trends from 1Q indicate that
this may lead to identification of NPLs that were classified as standard assets.
q It will also be important to watch out asset quality, slippages or restructuring, in
the infrastructure sector as select banks had faced stress even in 1Q.
Upside in Axis Bank; SBI to see uptick in profits
q Axis to report 30% profit growth led by loan growth and fall in NPL provisioning.
q SBI is likely to see uptick in profits after two consecutive subdued quarters; Union
would report a high growth on a low base.
q Infra-NBFCs are likely to see moderation in loan growth and forex losses could have
considerable impact on PFC’s profits and some impact for REC as well.
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