Banks, Insurance Q1 Results Preview - FY24 To Start On A Healthy Note; Trend To Moderate: Motilal Oswal

Motilal Oswal Report

We estimate our banking coverage universe to deliver ~54% YoY growth in profit after tax in Q1 FY24 and sustain pre-provision operating profit growth at ~35% YoY.

Private banks – profit after tax to grow ~32% YoY in Q1 FY24

We estimate private banks to report PPoP growth of ~31% YoY (flat QoQ) and profit after tax growth of ~32% YoY (-4.8% QoQ) in Q1 FY24. Earnings should remain steady, aided by healthy business growth and benign credit costs, but margin pressure and elevated opex may affect the overall growth trajectory.

Margins may moderate for select banks, due to the rising cost of deposits and stagnating yields. However, healthy loan growth will continue to aid net interest income. We estimate net interest income growth of ~28% YoY (3.7% QoQ) in Q1 FY24, with ICICI Bank Ltd. at ~36%, Kotak Mahindra Bank Ltd. at ~32%, Axis Bank Ltd. at ~31%, HDFC Bank Ltd. at ~26%, and IndusInd Bank Ltd. at 8% YoY.

Public sector banks' earnings momentum to remain robust

PSB earnings growth is likely to remain robust, aided by controlled credit costs, though margins can show a downside bias on rising funding costs. PSBs are likely to deliver NII/PPoP growth of 27%/40% YoY and profit after tax growth of ~96% YoY (-12.8% QoQ) in Q1 FY24E.

Opex is likely to remain elevated as banks provide for wage revisions. Treasury performance should remain healthy due to a moderation in bond yields and a recovery in capital markets.

Life Insurers: Premium growth muted; value of new business margins steady, barring Max Financial Services Ltd.

We expect premium growth to remainmuted after a robust Q4 FY23. Demand for annuity, non-par and credit life segments is likely to fare relatively better, while protection is witnessing a gradual recovery. The growth outlook, after the implementation of budgetary changes especially in the non-unit linked insurance plan segment, would be a keymonitorable.

Premium growth: We expect HDFC Life Insurance Company Ltd./SBI Life Insurance Company Ltd./Max Financial Services to post annual premium equivalent growth of 15%/8%/8% YoY in Q1 FY24, while ICICI Prudential Life Insurance Company Ltd. is likely to post a 9% YoY decline in APE.

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