BFSI Q4 Results Preview - Strong Earnings Momentum Likely: Dolat Capital

Dolat Capital Report

Banks will continue to benefit from healthy credit growth, faster asset repricing, and low credit costs during Q4 FY23. Net interest income is expected to grow by 32% YoY and 7% QoQ for coverage banks. Public sector banks are likely to be a bigger beneficiary of net interest margin expansion in Q4 given their higher share of marginal cost of funds based lending rate loans which are re-pricing with a lag.

Further, low credit costs should drive profit after tax growth of 45% YoY for coverage universe (excluding of Axis Bank Ltd.). We factor in loan growth of 17% YoY and 5% QoQ for banks under coverage.

Asset quality trends are likely to remain steady, with contained slippages and moderation in gross non performing asset ratios. Traction in retail deposits and NIM/growth outlook will be key monitorables during the quarter.

Affordable housing financiers are expected to report robust growth trends at over 7% QoQ and 30% YoY, along with improving asset quality. Prime lending rate hikes and rating upgrades (in last one-year) should support stable to improving spreads.

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