BFSI Q2 Results Preview - Earning Momentum Moderates; Growth Upbeat: Dolat Capital

Dolat Capital Report

Earnings for banks will continue to benefit from healthy credit growth and low credit costs. However, margin compression, elevated opex, and muted treasury income will result in moderation in profit after tax growth (up 15% YoY excluding of HDFC Bank Ltd.).

Net interest income is expected to grow by 18% YoY and 3% QoQ for coverage banks (excluding HDFC Bank).

Public sector banks should continue to see stable to improving net interest margin, benefitting from high share of marginal cost of fund based lending rate loans which are repricing with a lag. We factor in loan growth of 15% YoY and 3.5% QoQ (excluding HDFC Bank) for banks under coverage.

Contained asset quality will continue to aid profitability, pre-provision operating profit growth at 10% YoY. Many PSBs and mid-sized banks could continue to make contingent provisions in preparation of transition to expected credit loss framework.

Affordable housing financiers are expected to report robust growth trends at 6% QoQ and 28% YoY, along with improving asset quality. Rise in cost of fund to impact spreads across housing finance companies.

Gold loan non-banking financial companies will face a seasonally weak quarter, but customer additions should strengthen.

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