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Banking and Financial Institutions
Lacklustre quarter with lower credit growth and dip in margins…
Incremental credit disbursements till June 17, 2011 were just |
62862 crore whereas deposits accretion was robust at | 139998
crore, leading to an incremental C/D ratio of 45% for the quarter.
This translates into growth of 20.7% YoY in credit and 18.2% YoY in
deposits. However, credit growth for the full year is expected to
moderate to 18-19% YoY as GDP growth estimates have been
lowered from 8.5% earlier to 7.8-8.5%. Moreover, higher savings
rate at 4% will impact NIM this quarter leading to a dip of 10-15 bps.
Asset quality and investment MTM provisions to be watched…
We do not expect fresh addition in NPA after a sharp up-tick seen in
FY11. Hence, we see lower incremental provisions on fresh
slippages. However, recent policy changes on sub-standard assets
and restructured loans may raise the provisions slightly. With the 10
year G-Sec yields high at 8.3% as at quarter end, MTM provisions
may remain high for the AFS investment portfolio. OBC, SBI and IOB
may feel the heat due to the same. We expect PSBs excl. SBI to
report NII growth of 19.7% YoY and PAT growth of 12.4% YoY as
SBI’s numbers were an aberration in Q4FY11 distorting the overall
PSB performance. Private banks are expected to be better off with
NII and PAT growing 22% and 32.7% YoY, respectively.
Company specific view (Banks)
Company Remarks
Bank of Baroda We expect a credit growth of 2% QoQ in Q1FY12E. Asset quality concerns
coupled with subdued NIM to remain an overhang on the bank's performance.
The C/I ratio will normalise post one-off provision for 2nd pension option in
Q4FY11 to ~36%. We expect PAT to decline by 10% QoQ
Bank of India Asset quality stress will peak out in the next two quarters, which will keep credit
cost on higher side, thus impacting PAT growth. NIM will moderate QoQ to
~2.8% due to higher borrowing cost. The bank's opex shot up by 55% QoQ in
Q4FY11 primarily due to one-off provision for second pension option. We expect
opex to come down by ~38% QoQ
Dena Bank Higher borrowing cost will pressurise NII growth QoQ. NIM is seen at 2.8%. Noninterest
income growth will remain sluggish impacting RoA. Provisions are seen
moderating and PAT flattish QoQ
IDBI Bank We expect a dull quarter for IDBI with sluggish credit offtake and higher CoD
pushing NIM down to sub 2% levels. We expect CASA to moderate to 17.5%
from 21% (one-off spurt in current A/C) in Q4FY11. Higher provisioning
requirements will push up credit costs depressing PAT
Indian Overseas
Bank
We expect business growth of ~2% QoQ (37% YoY) in Q1FY12E. We see a 10
bps QoQ decline in margins to ~3.05% on account of higher CoF. Moreover, the
bank is likely to face an MTM hit on its AFS investment portfolio on account of
higher bond yields
Oriental Bank of
Commerce
OBC has started reporting an improved NIM of 3% and above in the last six
quarters against 2% earlier. However, we estimate a contraction of 10-15 bps in
this quarter. Lower provisions will boost bottomline leading to a growth of 19%
YoY (9.4% QoQ)
Punjab National
Bank
We expect a lazy first quarter with 2% QoQ business growth, sequentially flat NII
with higher credit costs on account of higher provisioning requirement for NPA
and restructured assets. PAT is seen flat QoQ at | 1133 crore
State Bank of
India
After the shocking Q4FY11 results, we expect Q1FY12 to be better with NII
estimated at | 93.3 bn registering a growth of 28% YoY despite lower credit
growth of 17% YoY and NIM declining 5-10 bps QoQ. With total provisions
staying high at | 47 bn, we expect PAT to decline 43% YoY to | 16.5bn
Syndicate Bank The pressure on the cost front seems to be easing from this quarter. However,
wage overlap on account of replacement of retiring employees will play out in
FY12. The bank is now on 100% system based recognition, which will keep credit
cost high this quarter. However, we see NPA peaking in H2FY12
Union Bank of
India
Business growth will be in line with industry with NII declining by ~10% QoQ
due to rising CoF. However, with opex declining sequentially (the bank took a
one-off hit for the second pension option for retired employees in Q4FY11), we
expect PAT to stay flat QoQ
Axis Bank We expect business growth to stay muted this quarter with margins declining
due to higher CoD and impact of 50 bps hike in savings rate. The bank may see
MTM pressure from its AFS investment book due to bond yields edging upwards.
However, lower credit costs will shield bottomline leading to yet another quarter
with 30% YoY jump in PAT
City Union Bank Business growth is seen at 28% YoY (3% QoQ) leading to NII growth of 32% YoY
(2% QoQ). We estimate stable asset quality and provisions (excluding tax)
halving QoQ. Hence, we expect PAT growth of 38% YoY (up 19% QoQ)
DCB NII growth will remain flat at ~4.8% QoQ) with margins facing pressure from
rising cost of funds. The bank has received a license for 10 new branches, which
will lead to higher opex. We expect consistent improvement in asset quality to
lower credit costs. We expect PAT of | 12.1 crore (7% QoQ)
Dhanlaxmi Bank The bank requires another | 7 crore of provision to reach PCR of 70% by
September 2011, which will not be visible in this quarter. We see high provisions
being maintained at | 8.5 crore leading to 24% YoY jump in PAT despite a healthy
NII growth of 69.5% YoY
Source: Company, ICICIdirect.com Research
The full quarter impact of a hike in savings rate will impact NIM by 10-15 bps.
Bottomline growth of 30% YoY would be supported by both NII, which is seen up
19% and non-interest income growth of 13% YoY
Federal Bank We have maintained higher provisioning cost for the quarter. NII is seen up 43%,
which will absorb higher credit cost and result in mild moderation in PAT growth
on a YoY basis
Kotak Bank Loan growth will be maintained over 30% YoY. However, in spite of a dip in NIM,
we believe it should remain above 5% thereby ensuring bank profits grow at 25%
YoY. Other subsidiaries like Kotak Securities will underperform while AMC and
Kotak Prime may contribute higher to consolidated profits
South Indian
Bank
We expect a healthy 6% QoQ growth in both deposits and advances. C/D ratio
will be maintained at 71%. NIM is seen at 2.9%. Other income growth will remain
subdued and operating expenses will be flat QoQ resulting in PAT growth of 30%
YoY, down 6% QoQ
Yes Bank Non-interest income to total income is seen at 29%, lower than the average 33%
in FY11 due to lower credit offtake and higher yields impacting treasury.
Operating expense will rise with opening of new branches during the quarter.
PAT growth to remain healthy at 49% YoY
Source: Company, ICICIdirect.com Research
Company specific view (NBFCs)
Company Remarks
IDFC Growth will slow down after strong lending undertaken in FY11. Spreads will be
maintained at 2.2% sequentially. We expect NII growth to be at 27% YoY.
However, higher base of other income in Q1FY11 will lead to a dip of 47% YoY in
the same leading to a 9.3% YoY decline in profits
LIC Housing
Finance
Credit growth will be strong at over 30%. Margins will decline 10 bps sequentially
as costs will rise higher than yields. Provisions assumed flatter QoQ. Thus,
overall profitability will remain strong at 42% YoY
Reliance Capital Performance of AMC and commercial finance will remain strong and show a
sequential improvement. However, motor pool provision share of general
insurance will be continued every quarter now (at ~ | 100 crore). Hence, overall
profits will stay low around | 104 crore, surging 35% YoY
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
Lacklustre quarter with lower credit growth and dip in margins…
Incremental credit disbursements till June 17, 2011 were just |
62862 crore whereas deposits accretion was robust at | 139998
crore, leading to an incremental C/D ratio of 45% for the quarter.
This translates into growth of 20.7% YoY in credit and 18.2% YoY in
deposits. However, credit growth for the full year is expected to
moderate to 18-19% YoY as GDP growth estimates have been
lowered from 8.5% earlier to 7.8-8.5%. Moreover, higher savings
rate at 4% will impact NIM this quarter leading to a dip of 10-15 bps.
Asset quality and investment MTM provisions to be watched…
We do not expect fresh addition in NPA after a sharp up-tick seen in
FY11. Hence, we see lower incremental provisions on fresh
slippages. However, recent policy changes on sub-standard assets
and restructured loans may raise the provisions slightly. With the 10
year G-Sec yields high at 8.3% as at quarter end, MTM provisions
may remain high for the AFS investment portfolio. OBC, SBI and IOB
may feel the heat due to the same. We expect PSBs excl. SBI to
report NII growth of 19.7% YoY and PAT growth of 12.4% YoY as
SBI’s numbers were an aberration in Q4FY11 distorting the overall
PSB performance. Private banks are expected to be better off with
NII and PAT growing 22% and 32.7% YoY, respectively.
Company specific view (Banks)
Company Remarks
Bank of Baroda We expect a credit growth of 2% QoQ in Q1FY12E. Asset quality concerns
coupled with subdued NIM to remain an overhang on the bank's performance.
The C/I ratio will normalise post one-off provision for 2nd pension option in
Q4FY11 to ~36%. We expect PAT to decline by 10% QoQ
Bank of India Asset quality stress will peak out in the next two quarters, which will keep credit
cost on higher side, thus impacting PAT growth. NIM will moderate QoQ to
~2.8% due to higher borrowing cost. The bank's opex shot up by 55% QoQ in
Q4FY11 primarily due to one-off provision for second pension option. We expect
opex to come down by ~38% QoQ
Dena Bank Higher borrowing cost will pressurise NII growth QoQ. NIM is seen at 2.8%. Noninterest
income growth will remain sluggish impacting RoA. Provisions are seen
moderating and PAT flattish QoQ
IDBI Bank We expect a dull quarter for IDBI with sluggish credit offtake and higher CoD
pushing NIM down to sub 2% levels. We expect CASA to moderate to 17.5%
from 21% (one-off spurt in current A/C) in Q4FY11. Higher provisioning
requirements will push up credit costs depressing PAT
Indian Overseas
Bank
We expect business growth of ~2% QoQ (37% YoY) in Q1FY12E. We see a 10
bps QoQ decline in margins to ~3.05% on account of higher CoF. Moreover, the
bank is likely to face an MTM hit on its AFS investment portfolio on account of
higher bond yields
Oriental Bank of
Commerce
OBC has started reporting an improved NIM of 3% and above in the last six
quarters against 2% earlier. However, we estimate a contraction of 10-15 bps in
this quarter. Lower provisions will boost bottomline leading to a growth of 19%
YoY (9.4% QoQ)
Punjab National
Bank
We expect a lazy first quarter with 2% QoQ business growth, sequentially flat NII
with higher credit costs on account of higher provisioning requirement for NPA
and restructured assets. PAT is seen flat QoQ at | 1133 crore
State Bank of
India
After the shocking Q4FY11 results, we expect Q1FY12 to be better with NII
estimated at | 93.3 bn registering a growth of 28% YoY despite lower credit
growth of 17% YoY and NIM declining 5-10 bps QoQ. With total provisions
staying high at | 47 bn, we expect PAT to decline 43% YoY to | 16.5bn
Syndicate Bank The pressure on the cost front seems to be easing from this quarter. However,
wage overlap on account of replacement of retiring employees will play out in
FY12. The bank is now on 100% system based recognition, which will keep credit
cost high this quarter. However, we see NPA peaking in H2FY12
Union Bank of
India
Business growth will be in line with industry with NII declining by ~10% QoQ
due to rising CoF. However, with opex declining sequentially (the bank took a
one-off hit for the second pension option for retired employees in Q4FY11), we
expect PAT to stay flat QoQ
Axis Bank We expect business growth to stay muted this quarter with margins declining
due to higher CoD and impact of 50 bps hike in savings rate. The bank may see
MTM pressure from its AFS investment book due to bond yields edging upwards.
However, lower credit costs will shield bottomline leading to yet another quarter
with 30% YoY jump in PAT
City Union Bank Business growth is seen at 28% YoY (3% QoQ) leading to NII growth of 32% YoY
(2% QoQ). We estimate stable asset quality and provisions (excluding tax)
halving QoQ. Hence, we expect PAT growth of 38% YoY (up 19% QoQ)
DCB NII growth will remain flat at ~4.8% QoQ) with margins facing pressure from
rising cost of funds. The bank has received a license for 10 new branches, which
will lead to higher opex. We expect consistent improvement in asset quality to
lower credit costs. We expect PAT of | 12.1 crore (7% QoQ)
Dhanlaxmi Bank The bank requires another | 7 crore of provision to reach PCR of 70% by
September 2011, which will not be visible in this quarter. We see high provisions
being maintained at | 8.5 crore leading to 24% YoY jump in PAT despite a healthy
NII growth of 69.5% YoY
Source: Company, ICICIdirect.com Research
The full quarter impact of a hike in savings rate will impact NIM by 10-15 bps.
Bottomline growth of 30% YoY would be supported by both NII, which is seen up
19% and non-interest income growth of 13% YoY
Federal Bank We have maintained higher provisioning cost for the quarter. NII is seen up 43%,
which will absorb higher credit cost and result in mild moderation in PAT growth
on a YoY basis
Kotak Bank Loan growth will be maintained over 30% YoY. However, in spite of a dip in NIM,
we believe it should remain above 5% thereby ensuring bank profits grow at 25%
YoY. Other subsidiaries like Kotak Securities will underperform while AMC and
Kotak Prime may contribute higher to consolidated profits
South Indian
Bank
We expect a healthy 6% QoQ growth in both deposits and advances. C/D ratio
will be maintained at 71%. NIM is seen at 2.9%. Other income growth will remain
subdued and operating expenses will be flat QoQ resulting in PAT growth of 30%
YoY, down 6% QoQ
Yes Bank Non-interest income to total income is seen at 29%, lower than the average 33%
in FY11 due to lower credit offtake and higher yields impacting treasury.
Operating expense will rise with opening of new branches during the quarter.
PAT growth to remain healthy at 49% YoY
Source: Company, ICICIdirect.com Research
Company specific view (NBFCs)
Company Remarks
IDFC Growth will slow down after strong lending undertaken in FY11. Spreads will be
maintained at 2.2% sequentially. We expect NII growth to be at 27% YoY.
However, higher base of other income in Q1FY11 will lead to a dip of 47% YoY in
the same leading to a 9.3% YoY decline in profits
LIC Housing
Finance
Credit growth will be strong at over 30%. Margins will decline 10 bps sequentially
as costs will rise higher than yields. Provisions assumed flatter QoQ. Thus,
overall profitability will remain strong at 42% YoY
Reliance Capital Performance of AMC and commercial finance will remain strong and show a
sequential improvement. However, motor pool provision share of general
insurance will be continued every quarter now (at ~ | 100 crore). Hence, overall
profits will stay low around | 104 crore, surging 35% YoY
Source: Company, ICICIdirect.com Research
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