BFSI Q3 Results Preview - Dolat Capital Gauges Muted Growth; Muthoot Finance, ICICI Bank Among Top Picks

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Dolat Capital Report

Q3 FY25 earnings growth for banks to decline QoQ by 5-6% driven by growth slowdown, normalisation in credit costs, and lower treasury gains. Barring unsecured loans, we expect steady asset quality trends for other segments.

We build in net interest income growth of 2% QoQ and 7% YoY for coverage banks. Operating profit will be up 15% YoY/-3% QoQ, benefitting from base effect (large pension expense for SBI in Q3 FY24 (up 10% YoY ex-SBI). RoAs to remain at the upper end of long-term averages, led by healthy NIMs and controlled credit costs.

For banks like RBL Bank/IndusInd Bank with considerable MFI exposure, a sharp rise in slippage and credit costs will weaken profitability metrics. We factor in loan growth of 10.5% YoY and 2.5% QoQ for coverage banks. Slowdown in retail unsecured credit (personal loan/credit card/micro finance), structural challenges in deposit accretion, and delayed pick up in private capex are all contributing to slower system growth vs anticipated earlier.

Any seepage of unsecured stress to secured assets remains a monitorable. Affordable housing financiers to report robust growth trends at 6% QoQ, along with steady asset quality. Loan growth for gold loan NBFCs is expected at ~2-5% QoQ despite seasonal weakness, benefitting from slowdown in retail unsecured credit, reduced competitive intensity, and elevated gold prices.

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