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All eyes on restructuring
Incremental restructuring and pipeline will dominate the
attention of investors even as other asset quality matrices are
likely to remain largely stable. Pre-provisioning profit growth
for PSBs estimated to be strong (25% YoY for PSBs ex-SBI),
despite sequential pressure on NIMs and material moderation
in credit growth, led by distorted base (pension provisioning
and –ve one-offs for SBI). However, relatively higher
provisioning cost for PSBs led by slippages and incremental
restructuring should lead to continuation of the divergent
earnings performance trend among private banks and PSBs.
HDFC Bank and ICICI Bank should lead private banks while SBI
should fare relatively better among PSBs.
All eyes on incremental restructuring and pipeline: In the
light of moderating economic activity, we expect asset quality
trends to remain the key focus area for the next few earnings
seasons. Incremental restructuring is expected to increase as
banks try to avoid slippages into NPA. Trends in cases referred
to CDR corroborate our long held concern of material increase
in restructured assets. This also implies that deterioration in
other matrices (GNPA, slippage etc) will be avoided for now.
We look forward to clarity on incremental restructuring
pipeline as well as status of SEB restructuring from
management of banks.
Some pressure on NIMs likely: Not withstanding the strong
pricing power aided by tight liquidity, we expect NIMs to
witness marginal pressure (5-10bps) on a sequential basis,
especially for PSBs. The firm wholesale rates, fuller impact of
deregulation of NRE deposit rates, some impact of priority
sector lending and selective downward tweaking of lending
rates could collectively force the NIMs downwards, albeit
marginally. Sequential pressure on NIMs and dramatic
slowdown in loan growth should keep NII growth in higher
single digits for PSBs ex-SBI compared with ~17% YoY growth
estimated for private peers.
Base distortions: The distorted base effect (pension
provisioning and –ve one-offs for SBI) will help PSBs report
strong growth in pre-provisioning profit (33% for PSBs vs 20%
for private peers). However at bottom-line level, we estimate
private peers to report 24% YoY growth on aggregate basis
compared with 9% YoY growth for PSBs ex-SBI. Among the
banks under our coverage, we expect HDFC Bank and ICICI
Bank to report stronger performance while Bank of India and
SBI should lead from bottom-line growth perspective among PSBs.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
All eyes on restructuring
Incremental restructuring and pipeline will dominate the
attention of investors even as other asset quality matrices are
likely to remain largely stable. Pre-provisioning profit growth
for PSBs estimated to be strong (25% YoY for PSBs ex-SBI),
despite sequential pressure on NIMs and material moderation
in credit growth, led by distorted base (pension provisioning
and –ve one-offs for SBI). However, relatively higher
provisioning cost for PSBs led by slippages and incremental
restructuring should lead to continuation of the divergent
earnings performance trend among private banks and PSBs.
HDFC Bank and ICICI Bank should lead private banks while SBI
should fare relatively better among PSBs.
All eyes on incremental restructuring and pipeline: In the
light of moderating economic activity, we expect asset quality
trends to remain the key focus area for the next few earnings
seasons. Incremental restructuring is expected to increase as
banks try to avoid slippages into NPA. Trends in cases referred
to CDR corroborate our long held concern of material increase
in restructured assets. This also implies that deterioration in
other matrices (GNPA, slippage etc) will be avoided for now.
We look forward to clarity on incremental restructuring
pipeline as well as status of SEB restructuring from
management of banks.
Some pressure on NIMs likely: Not withstanding the strong
pricing power aided by tight liquidity, we expect NIMs to
witness marginal pressure (5-10bps) on a sequential basis,
especially for PSBs. The firm wholesale rates, fuller impact of
deregulation of NRE deposit rates, some impact of priority
sector lending and selective downward tweaking of lending
rates could collectively force the NIMs downwards, albeit
marginally. Sequential pressure on NIMs and dramatic
slowdown in loan growth should keep NII growth in higher
single digits for PSBs ex-SBI compared with ~17% YoY growth
estimated for private peers.
Base distortions: The distorted base effect (pension
provisioning and –ve one-offs for SBI) will help PSBs report
strong growth in pre-provisioning profit (33% for PSBs vs 20%
for private peers). However at bottom-line level, we estimate
private peers to report 24% YoY growth on aggregate basis
compared with 9% YoY growth for PSBs ex-SBI. Among the
banks under our coverage, we expect HDFC Bank and ICICI
Bank to report stronger performance while Bank of India and
SBI should lead from bottom-line growth perspective among PSBs.
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