Banks Q4 Results Preview - Deposit Growth To Outpace Loan Accretion: Prabhudas Lilladher

Prabhudas Lilladher Report

Banks under our coverage are expected to witness a weak quarter, as core earnings could fall by 4.6% QoQ to Rs 483 billion (versus +1.1% QoQ in Q3 FY24), mainly driven by reduction in net interest margin. Loan growth might come in at 4% QoQ (4.3% in Q3 FY24), while deposit accretion could be +5.3% QoQ (1.9% last quarter).

Loan-to-deposit ratio may fall by 1% QoQ to 86% mainly led by HDFC Bank Ltd. Net interest margin contraction would increase this quarter (versus Q3 FY24) and we expect NIM to decline by 10 bps QoQ (-2 bps in Q3 FY24) to 3.55%.

IndusInd Bank Ltd., City Union Bank Ltd. and DCB bank Ltd. may see better NIM performance. Owing to seasonality in case of public sector banks, fees for could grow by 9.7% QoQ to Rs 360 billion which would be offset by higher opex at Rs 918 billion (+10.5% QoQ).

Core pre-provision operating profit may come in at Rs 720 billion (-4.4% QoQ). Axis Bank Ltd., ICICI Bank Ltd. and HDFC Bank Ltd. might do better on core PPoP.

Gross slippage ratio might see a decline of 9 bps QoQ as large banks had witnessed increase in agri slippages in Q3 FY24. Banks’ profit after tax is expected to decline by 6.1% QoQ to Rs 534 billion. Among our coverage universe we prefer Axis Bank and HDFC Bank.

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