The healthy loan growth is fueled by sustained momentum in retail and business banking, along with a gradual recovery in the corporate sector.
Deposit growth, too, has gathered pace on the back of aggressive competition, a push for deposits, and competitive TD rates offered by banks. As a result, the gap between credit and deposits narrowed to 3.4% in March 2024.
Among the banks, brokerage firm Motilal Oswal Financial Services expects ICICI Bank, Axis Bank and Kotak Mahindra Bank to see a 7-11 bps moderation in NIM, while it expects flat NIMs for HDFC Bank, RBL Bank, SBI, IndusInd Bank and Union Bank of India. AU Small Finance Bank is expected to see a substantial moderation in NIMs.
For Q4FY24, the broking firm estimates net interest income (NII) for its banking coverage universe to grow 7.4% YoY and 2.9% QoQ (excluding HDFC Bank), while controlled opex and modest treasury gains (amid moderation in bond yields) will enable 1.6% YoY and 5.5% QoQ growth in pre-provisions operating profit (PPoP) (excluding HDFCB).
For 4QFY24, it estimates earnings growth of 12% YoY for PSU banks and 14% for private banks (6% excluding HDFC Bank).
ICICI Bank, IndusInd Bank and State Bank of India (SBI) are among top picks in the banking sector from Motilal Oswal ahead of Q4 results.
ICICI Bank | Buy | TP: ₹1,250
ICICI Bank is transitioning into a growth leader in the SME and Retail segments, supported by ongoing investments in technology and strategic partnerships with new ecosystem players. Motilal Oswal estimates an 18% CAGR in loans over FY24-26.
The bank has the potential for re-rating, driven by its consistent delivery of strong return ratios and sustained growth, attributed to its focus on enhancing core operating performance, Motilal Oswal said. It estimates RoA and RoE of 2.2% and 17.8% in FY26.
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ICICI Bank is expected to report healthy loan growth, led by retail and SME segments with moderating credit costs in Q4FY24. Adequate contingency buffers is likely to add comfort, while potential reversal in AIF provisions will aid credit cost improvement.
IndusInd Bank | Buy | TP: ₹1,900
IndusInd Bank has maintained its market share of around 2% of net systemic advances, backed by its leadership position in vehicle finance and MFI, which formed 26% and 11% of its advances, respectively, as on Q3FY24. The bank has guided for 18-23% in PC6 (FY23-26), which the brokerage firm believes is fairly achievable amid a healthy demand environment.
IndusInd Bank is expected to post healthy growth of over 17% for FY24-26. It is estimated to see RoA and RoE of 2.0% and 16.7% in FY26.
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State Bank of India | TP: ₹860
State Bank of India (SBI) delivered steady 17% and 15.1% YoY loan growth in FY23 and 9MFY24 while focusing on building a granular and high-quality loan portfolio. It has been witnessing a healthy pick-up in corporate loan growth amid improved demand and healthy utilization.
SBI has been steadily growing its deposit base, up 13% YoY to ₹47.6 lakh crore in 9MFY24. Despite higher rates being offered by competition, the management does not foresee any challenges in garnering deposits, even at such a large base, Motilal Oswal said.
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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Published: 08 Apr 2024, 11:52 AM IST