Three private sector banks -- HDFC Bank, DCB Bank and RBL Bank -- will open the results season this week. While earnings from the banking sector has been a side show in the recent past, it’s highly anticipated that at least private banks, and some healthy public sector banks, will deliver better results for the year ended March, 2019.
Analysts tracking HDFC Bank believe that the lender’s loan growth will be broad-based, unlike bank credit growth, and way above the industry’s average growth of about 24 per cent in the third quarter of FY19. “Retail products are sustaining growth momentum with the bank also gaining market share in wholesale financing, largely from working capital/medium term funding and some from refinancing of term loans,” observed Edelweiss Research in a note.
With the bank placing significant thrust on amassing deposits, analysts expect strong accretion on a sequential basis. But, a decline in CD ratio could be a drag on the bank’s net interest margins, though it could muster support from increasing share of unsecured lending.”There is no major exposure in the pipeline which is likely to be stressed and asset quality trends will continue to be benign. However, we will monitor performance of the agri portfolio as slippages in the sector were higher in Q3FY19,” it noted.
Similarly, DCB’s loan growth too is likely to be higher at over 23 per cent despite moderation in corporate portfolio (intentional run down by the bank).
According to Edelweiss, the bank’s NIMs has been consistently coming off and hence it expects it further moderate marginally to 3.75-3.80 per cent due to weaker CASA franchise and sustained pressure on yields. “Higher proportion of LAP and MSME (which are affected due to second order impact of recent liquidity pressure) will keep asset quality volatile,” it said adding that operating expenses growth will be within control as the bank’s branch expansion has been largely completed.