BFSI Q4 Results Preview: Muted Earnings Off A High Base, Says Dolat Capital; Muthoot Finance Among Top Picks

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Dolat Capital Report

In Q4 FY25, banks are expected to experience a modest earnings growth of 1% QoQ (-5% YoY), impacted by moderation in growth and net interest margin, and gradual normalization of credit cost. We build in net interest income growth of 2% QoQ/ 4% YoY for coverage banks. Operating profit will be up 6% QoQ (-1% YoY) as seasonally higher fee lines and slightly better treasury gains aid other income. Despite 25 bps repo rate cut in Feb and 30-60% of EBLR linked loan share across most banks, NIM moderation will be limited in Q4 as many banks have three-month reset frequency on EBLR loans.

Additionally, NIM across several banks will benefit from SA rate cut during the quarter (including Kotak Mahindra Bank, IndusInd Bank, RBL Bank, City Union Bank, DCB Bank, Federal Bank, CSB). RoAs to remain at the upper end of long-term averages for most banks (barring IndusInd Bank, RBL), led by healthy NIMs, seasonally strong fee lines, robust recoveries, and largely benign credit costs.

Credit cost is normalizing at higher levels but remains contained. Slippages in credit card and personal loan have likely peaked, but MFI delinquencies will likely be at elevated levels.

Expect robust growth trends for affordable housing financiers at 8% QoQ, with sequential improvement in asset quality. Loan growth for gold NBFCs is expected to be strong at 5-10% QoQ as elevated gold prices, seasonally strong demand, and slowdown in unsecured credit drive growth.

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