BFSI Q3 Results Review, Top Sector Ideas: Axis Securities

Axis Securities Report

Banks-

Banks under our coverage continued to report healthy credit growth, largely led by the retail/small and medium enterprise segment, with some pick-up in corporate lending. Comments around RBI asking banks to maintain credit-deposit ratio around ~75% dominated the discussion during the quarter.

Most banks have highlighted that deposit accretion would remain a key lever to maintain the pace of credit growth. While credit growth has not shown any visible signs of slowdown, banks have indicated that they would calibrate growth in the unsecured segments given the stress visible in certain pockets, and pursue growth where risk-reward is favorable.

In our view, deposit mobilisation remains a key lever to support the buoyancy in credit growth. Inability to do so would result in credit growth slowdown and/or net interest margin compression.

NBFCs -

During the quarter, most non-banking financial companies under our coverage reported healthy assets under manangement growth, driven by improvement in disbursements across most lenders. Many NBFCs have turned cautious in pursuing growth in the unsecured segment and would look to calibrate growth. The management commentary on growth momentum sustaining is encouraging.

Top idea picks

ICICI Bank -

ICICI Bank Ltd. remains our most preferred pick amongst the banks. We continue to value ICICIB on the back of-

1. strong retail-focused liability franchise,

2. Buoyant growth prospects,

3. Stable asset quality coupled with healthy provision coverage,

4. Adequate capitalisation, and

5. potential to deliver robust return metrics.

Equitas Small Finance Bank-

The management has indicated that the demand visibility across products remains healthy, and Equitas Small Finance Bank Ltd. aspires to grow the portfolio at around 25-28% over FY25E.

This growth will be further supported by the introduction of credit cards in H1 FY25E. The strong deposit growth visible has been an outcome of-

1. competitive pricing,

2. product proposition, and

3. relationship management.

Going ahead, the bank will continue to focus on current account and savings account and retail term-deposits to build the deposit franchise. The management has guided to bring down the C/D ratio to 90%/85% by FY24/25E.

State Bank of India

SBI remains the best play of the resilient Indian economy due to attributes like-

1. A healthy PCR,

2. Adequate capitalization,

3. A strong liability franchise, and

4. An improved asset quality outlook.

Manappuram Finance

Manappuram Finance Ltd.'s management highlighted that seasonal impact kept the gold loan book flat; however, it expects strong growth in Q4 FY24, with gold loan growth expected to be maintained at 8-10% for FY24. Quick turnaround time, wherein only 15-20 minutes is taken for online gold loans for new customers and even less for existing customers, remains a key competitive edge for the company.

New customer acquisition remains at steady levels of 5,000/day. Furthermore, the management indicated that the share of the non-gold loan book will continue to rise beyond 50% on a consolidated basis.

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