NBFCs Q3 Results Preview - Strong Growth Traction To Continue Across Asset Classes: ICICI Securities

ICICI Securities Report

In our view, strong credit demand across product segments could potentially support earnings and partially offset the likely adverse impact of net interest margin compression in Q3 FY24E.

AHFCs, small finance banks, non-banking financial company-micro finance institutions and micro, small and medium enterprise financiers are likely to deliver 6-8% QoQ assets under management growth, while growth for prime mortgage players (PNB Housing Finance Ltd. and LIC Housing Finance Ltd.) is likely to remain muted at 3% QoQ.

We expect NIM compression of 10-20 bps for HFCs, while players with high MFI exposure (SFBs and NBFC MFIs) may witness 10-20 bps QoQ NIM expansion as they may continue to benefit from the repricing of back book at higher rate.

However, going ahead, with regards to the Reserve Bank of India’s recent commentary on MFI lending rates, MFI players would have limited scope to further hike rates and soon they have to start passing on the benefit of operating leverage and any improvement in cost of fund in near term.

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