In the March quarter (Q4FY23) of fiscal 2022–2023, the banking industry is anticipated to post solid results, driven by robust loan growth, improved margins, and decreased credit costs.
According to domestic brokerage house Sharekhan by BNP Paribas, deposits growth is picking up, but growth in low-cost CASA deposits is muted while it is higher in term deposits and wholesale deposits, with the exception of HDFC Bank. Sharekhan by BNP Paribas added, “We remain watchful on margin guidance going forward as we are closer to peaking of margins for banks.”
Banks are anticipated to enjoy stronger growth in core earnings at +10.5% quarter on quarter (QoQ) to 496 billion compared to +3.8% QoQ in the previous quarter, mostly driven by lower provisions, according to domestic brokerage and research firm Prabhudas Lilladher.
As opposed to +23 bps in the previous quarter, the brokerage anticipates NIM for banks to expand at a slower rate of 7 basis points QoQ to 4.2 percent. According to Prabhudas Lilladher, ICICI Bank and Kotak Mahindra Bank may be exceptions in terms of NIM increase.
Also, it stated that provisions could fall by 8 bps QoQ to 79 bps. The firm predicted that banks’ PAT would be $528 billion (+4.8% QoQ), highlighting ICICIB, SBI, and DCB as its top picks. Guidance on deposits and NIM will be important monitorables, it said.
The increase in the cost of deposits and more rate hikes will have an impact on the margin trajectory in FY24, even if brokerage Motilal Oswal anticipates a stable-positive bias in margins in 4QFY23. According to the brokerage, there may be some pressure on margins in FY24.
Given the difficult macroeconomic scenario, high inflation, and large base impact, brokers will also keep an eye out for any changes in the demand environment.
The list of major, mid-tier, minor, and PSBS to purchase or hold is provided below:
Large Private Banks
HDFC Bank (Buy)
ICICI Bank (Buy)
Axis Bank (Buy)
Mid-Tier Private Banks
Kotak Mahindra Bank (Buy)
Indusind Bank (Buy)
Federal Bank (Buy)
Bandhan Bank (Neutral)
Small Private Banks
AU SFB (Buy)
DCB Bank (Buy/Neutral)
The opinions and suggestions listed above are not Currency Veda rather, they represent the opinions of certain analysts or brokerage firms.