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Banking and Financial Institutions
Credit growth slowed to 17%, expected to dip further…
Impact of increased rates and slowing economic growth can be
experienced in declining credit growth at 17.1% YoY (December 16th)
and 8.2% YTD growth (from March 2011). Deposit growth though
remained robust till Q2, has also slowed down to 18.2% YoY (8.9%
YTD). We expect NIM to remain stable for most banks in Q3FY12E,
except for banks like Kotak Mahindra Bank, Yes Bank who increased
Savings rate impacting NIM immediately while the base rate hike to take
effect with a lag.
NPA additions to continue; pace of restructuring to rise...
Financial sector is passing through the tough time of deteriorating asset
quality, with Q2FY12 absolute GNPA surging 17% QoQ to |75357 crore
and NNPA ballooning 30% QoQ to |35483 crore for ICICIdirect Coverage
banks. We expect slippage ratio to remain high (over 2%) both from
restructured assets and fresh NPA accretion even in Q3FY12E.
Restructured assets to increase with GTL Infra; Haryana SEB among
others may add to the kitty.
10 year G-Sec closed at 8.56% for December quarter leading to
marginal MTM provisions on AFS investment portfolio (8.44%-
September close). We expect 12.9% and 1.4% YoY growth in NII and
PAT respectively for PSU banks while Private banks to report 16% and
25.5% YoY growth respectively
Company specific view (Banks)
Banks Remarks
Bank of Baroda Strong credit growth at ~22% YoY mainly boosted by overseas credit. NPA additions
not material and sequential provisions to remain higher at | 488 crore. Expect NII
growth of 17% YoY and PAT growth at 20% YoY with margins maintained around
3.1%.
Bank of India Recoveries to offset incremental slippages, thereby resulting in GNPA to remain
stable. High restructuring on account of exposure to aviation, Infra, Iron and steel
remains a concern. Provisions are expected to be back on normal track after lofty
provisioning made in Q2FY12. Business growth is expected to be slightly above
industry average at 19% while PAT de-growth of 18.5% is expected
Dena Bank High SEB exposure of 12% worth ~ 5000 crore remains a concern. We expect some
of these loans may be restructured impacting provisions and also leading to multiple
de-rating. However, we believe higher NII growth and lower opex growth due to base
effect would drive 18.2% YoY PAT growth to | 183 crore
IDBI Bank Credit growth of 16.5% YoY with NIM expected to be maintained above 2%.
Restructuring book could swell as assets like GTL (exposure worth | 800 crore) to be
shown as restructured assets. Provisions to stay high as bank has exposure to
troubled sectors like Infra and power. We expect 10.9% YoY PAT growth.
Indian Overseas
Bank
Overseas credit growth to result in a strong 31% YoY growth to | 130768 crore. GNPA
not expected to worsen, however restructured assets may surprise with assets like
GTL, etc to be substantial. NII growth to come off from over 30% to 17% YoY.
Oriental Bank of
Commerce
Pressure on asset quality to remain as high exposure to Infra, power, Iron and steel
continue to be an overhang. Strong business growth of 20% is expected; however NII
is estimated to grow marginally by 3% YoY. Non-interest income growth of 20% is
expected to salvage PAT growth. We estimate PAT to de-grow by 35.1% YoY but
improve sequentially to |265.1 crore.
Punjab National
Bank
A stable quarter with 19% credit growth and 21% deposit growth. NII growth to be
lower at 10% YoY and higher provision same as September quarter to continue. PAT
growth of 19.9% is estimated for Q3FY12
State Bank of
India
Profitability in Q3FY12 to remain strong at |28bn as provisions to be maintained in
line with Q2FY12. Restructured assets may surprise negatively. Credit to grow at 16%
YoY and margins to remain stable around 3.7%. Net Interest Income is expected to
grow 4% QoQ and 21% YoY to |109 bn.
Syndicate Bank Business growth is expected to be subdued at 15.9% YoY growth. Asset quality to
remain stable with provisions estimated to descend sequentially from | 507 crore to |
482 crore. Steady performance is expected on all fronts with 17% YoY PAT growth.
Union Bank of
India
Credit growth is expected to be sluggish at 16.5% YoY. Incremental NPA's to be offset
by recoveries leading to GNPA remaining stable. Provisions to be stable sequentially
at | 655 crore. PAT to grow 15% YoY and 0.3% QoQ.
Axis Bank PAT growth expected to decelerate to 20.2% YoY as pace of non-interest income
growth dips to 10% YoY. Credit growth of 23% YoY is estimated while NII growth of
21.6% YoY growth is expected on the back of strong NIM at 3.7%. High exposure to
Real estate and power remains an overhang on valuations
City Union Bank We expect bank to continue to deliver 30% credit growth with NIM to stay intact at
3.4%. NII growth of 22% YoY is expected with no negative surprise seen on asset
quality front. Overall strong performance would drive 25% YoY PAT growth.
DCB Zero tax provisions due to benefits of carry forward losses to lead 43% YoY PAT
growth. Business is expected to grow below industry average at 15.5% YoY; however
~10 bps YoY improvement in NIM to support 19% YoY NII growth. Asset quality is
expected to remain stable
Dhanlaxmi Bank Capital requirement and high interest rates would reduce the pace of credit growth to
25% YoY compared to 44% YoY in Q2FY12. NIM is expected to remain stable. Cost to
income ratio to stay at elevated levels of 92%. We estimate PAT to de-grow by 45.6%
YoY to | 3.95 crore.
Source: Company, ICICIdirect.com Research
Company specific view contd. (Banks)
HDFC Bank Bank to maintain NIM around 4.1% supported by 21% YoY credit growth and 22%
deposit growth. We expect interest income from Investments to boost NII growth to
14.1% YoY. PAT may grow slower than 30% YoY to |1395 crore (rising 28% YoY).
Federal Bank We estimate 21.4% YoY credit growth to | 34278.8 crore with NIM expected to be
maintained at ~3.7%. Asset quality to remain stable which would keep provisions
under check thereby driving 30% YoY PAT growth to | 191 crore.
Kotak Bank Increase in savings rate to impact margins by 15-20 bps to 4.6%, as lending rates
increase to take effect with a lag. Credit growth to taper down to 37% YoY from 41%
in Q2FY12. Credit quality not a concern with provisions manageable.
South Indian
Bank
SIB has reported consistent increase in earnings and expect 33% YoY and 1% QoQ
growth in profits for Q3FY12. Provisions at |25.5 crore to be lower than Q3FY11 but
higher sequentially. Business growth to be above 23% YoY
Yes Bank Savings rate of 7% is expected to improve the Savings balances and would lead to
near term contraction of NIM. Credit growth to be below historic average at 17% as
bank increases its investment position. Superior asset quality is expected to
maintained. We estimate bank to register 24.3% YoY PAT growth
Source: Company, ICICIdirect.com Research
Company specific view (NBFCs)
NBFC
LIC Housing
Finance
Reversal of |100 crore existing provision to boost profitability growth to 51% YoY in
Q3FY12 after a sharp cut seen in Q2FY12. We expect home loan credit disbursals to
slowdown, 24% YoY growth factored in Q3.
Reliance Capital Another quarter with lower growth and continued consolidation. 4% YoY revenue
growth expected due to cautious lending, declining AUM in MF and sluggish
insurance premium collection. Overall profitability to be muted at | 36.7 crore, same
as Q2FY12.
Source: Company, ICICIdirect.com Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Banking and Financial Institutions
Credit growth slowed to 17%, expected to dip further…
Impact of increased rates and slowing economic growth can be
experienced in declining credit growth at 17.1% YoY (December 16th)
and 8.2% YTD growth (from March 2011). Deposit growth though
remained robust till Q2, has also slowed down to 18.2% YoY (8.9%
YTD). We expect NIM to remain stable for most banks in Q3FY12E,
except for banks like Kotak Mahindra Bank, Yes Bank who increased
Savings rate impacting NIM immediately while the base rate hike to take
effect with a lag.
NPA additions to continue; pace of restructuring to rise...
Financial sector is passing through the tough time of deteriorating asset
quality, with Q2FY12 absolute GNPA surging 17% QoQ to |75357 crore
and NNPA ballooning 30% QoQ to |35483 crore for ICICIdirect Coverage
banks. We expect slippage ratio to remain high (over 2%) both from
restructured assets and fresh NPA accretion even in Q3FY12E.
Restructured assets to increase with GTL Infra; Haryana SEB among
others may add to the kitty.
10 year G-Sec closed at 8.56% for December quarter leading to
marginal MTM provisions on AFS investment portfolio (8.44%-
September close). We expect 12.9% and 1.4% YoY growth in NII and
PAT respectively for PSU banks while Private banks to report 16% and
25.5% YoY growth respectively
Company specific view (Banks)
Banks Remarks
Bank of Baroda Strong credit growth at ~22% YoY mainly boosted by overseas credit. NPA additions
not material and sequential provisions to remain higher at | 488 crore. Expect NII
growth of 17% YoY and PAT growth at 20% YoY with margins maintained around
3.1%.
Bank of India Recoveries to offset incremental slippages, thereby resulting in GNPA to remain
stable. High restructuring on account of exposure to aviation, Infra, Iron and steel
remains a concern. Provisions are expected to be back on normal track after lofty
provisioning made in Q2FY12. Business growth is expected to be slightly above
industry average at 19% while PAT de-growth of 18.5% is expected
Dena Bank High SEB exposure of 12% worth ~ 5000 crore remains a concern. We expect some
of these loans may be restructured impacting provisions and also leading to multiple
de-rating. However, we believe higher NII growth and lower opex growth due to base
effect would drive 18.2% YoY PAT growth to | 183 crore
IDBI Bank Credit growth of 16.5% YoY with NIM expected to be maintained above 2%.
Restructuring book could swell as assets like GTL (exposure worth | 800 crore) to be
shown as restructured assets. Provisions to stay high as bank has exposure to
troubled sectors like Infra and power. We expect 10.9% YoY PAT growth.
Indian Overseas
Bank
Overseas credit growth to result in a strong 31% YoY growth to | 130768 crore. GNPA
not expected to worsen, however restructured assets may surprise with assets like
GTL, etc to be substantial. NII growth to come off from over 30% to 17% YoY.
Oriental Bank of
Commerce
Pressure on asset quality to remain as high exposure to Infra, power, Iron and steel
continue to be an overhang. Strong business growth of 20% is expected; however NII
is estimated to grow marginally by 3% YoY. Non-interest income growth of 20% is
expected to salvage PAT growth. We estimate PAT to de-grow by 35.1% YoY but
improve sequentially to |265.1 crore.
Punjab National
Bank
A stable quarter with 19% credit growth and 21% deposit growth. NII growth to be
lower at 10% YoY and higher provision same as September quarter to continue. PAT
growth of 19.9% is estimated for Q3FY12
State Bank of
India
Profitability in Q3FY12 to remain strong at |28bn as provisions to be maintained in
line with Q2FY12. Restructured assets may surprise negatively. Credit to grow at 16%
YoY and margins to remain stable around 3.7%. Net Interest Income is expected to
grow 4% QoQ and 21% YoY to |109 bn.
Syndicate Bank Business growth is expected to be subdued at 15.9% YoY growth. Asset quality to
remain stable with provisions estimated to descend sequentially from | 507 crore to |
482 crore. Steady performance is expected on all fronts with 17% YoY PAT growth.
Union Bank of
India
Credit growth is expected to be sluggish at 16.5% YoY. Incremental NPA's to be offset
by recoveries leading to GNPA remaining stable. Provisions to be stable sequentially
at | 655 crore. PAT to grow 15% YoY and 0.3% QoQ.
Axis Bank PAT growth expected to decelerate to 20.2% YoY as pace of non-interest income
growth dips to 10% YoY. Credit growth of 23% YoY is estimated while NII growth of
21.6% YoY growth is expected on the back of strong NIM at 3.7%. High exposure to
Real estate and power remains an overhang on valuations
City Union Bank We expect bank to continue to deliver 30% credit growth with NIM to stay intact at
3.4%. NII growth of 22% YoY is expected with no negative surprise seen on asset
quality front. Overall strong performance would drive 25% YoY PAT growth.
DCB Zero tax provisions due to benefits of carry forward losses to lead 43% YoY PAT
growth. Business is expected to grow below industry average at 15.5% YoY; however
~10 bps YoY improvement in NIM to support 19% YoY NII growth. Asset quality is
expected to remain stable
Dhanlaxmi Bank Capital requirement and high interest rates would reduce the pace of credit growth to
25% YoY compared to 44% YoY in Q2FY12. NIM is expected to remain stable. Cost to
income ratio to stay at elevated levels of 92%. We estimate PAT to de-grow by 45.6%
YoY to | 3.95 crore.
Source: Company, ICICIdirect.com Research
Company specific view contd. (Banks)
HDFC Bank Bank to maintain NIM around 4.1% supported by 21% YoY credit growth and 22%
deposit growth. We expect interest income from Investments to boost NII growth to
14.1% YoY. PAT may grow slower than 30% YoY to |1395 crore (rising 28% YoY).
Federal Bank We estimate 21.4% YoY credit growth to | 34278.8 crore with NIM expected to be
maintained at ~3.7%. Asset quality to remain stable which would keep provisions
under check thereby driving 30% YoY PAT growth to | 191 crore.
Kotak Bank Increase in savings rate to impact margins by 15-20 bps to 4.6%, as lending rates
increase to take effect with a lag. Credit growth to taper down to 37% YoY from 41%
in Q2FY12. Credit quality not a concern with provisions manageable.
South Indian
Bank
SIB has reported consistent increase in earnings and expect 33% YoY and 1% QoQ
growth in profits for Q3FY12. Provisions at |25.5 crore to be lower than Q3FY11 but
higher sequentially. Business growth to be above 23% YoY
Yes Bank Savings rate of 7% is expected to improve the Savings balances and would lead to
near term contraction of NIM. Credit growth to be below historic average at 17% as
bank increases its investment position. Superior asset quality is expected to
maintained. We estimate bank to register 24.3% YoY PAT growth
Source: Company, ICICIdirect.com Research
Company specific view (NBFCs)
NBFC
LIC Housing
Finance
Reversal of |100 crore existing provision to boost profitability growth to 51% YoY in
Q3FY12 after a sharp cut seen in Q2FY12. We expect home loan credit disbursals to
slowdown, 24% YoY growth factored in Q3.
Reliance Capital Another quarter with lower growth and continued consolidation. 4% YoY revenue
growth expected due to cautious lending, declining AUM in MF and sluggish
insurance premium collection. Overall profitability to be muted at | 36.7 crore, same
as Q2FY12.
Source: Company, ICICIdirect.com Research
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