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Nirmal Bang Report
In Q3 FY23, we expect banks to continue to report healthy earnings growth, driven by:
margin expansion,
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healthy other income as G-Sec yields have moderate on a sequential basis, which is likely to keep treasury income stable and
lower credit cost.
We expect operating profit of the coverage banks to increase by 6.7% QoQ and 18.9% QoQ. Credit growth, as indicated by Reserve Bank of India data and provisional updates by various banks, indicates a sustained recovery in demand and it continues to remain strong for majority of the banks.
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Net interest margins are expected to improve QoQ as the benefit of re-pricing of marginal cost of lending rate and external benchmark lending rate linked loans is likely to have sustained in Q3 FY23. Moreover, deposits mobilisation and increasing cost of funds would be key monitorables.
Asset quality outlook continues to improve as we don't anticipate any major surprises in either retail or corporate segment. Profit after tax for the coverage banks is estimated to grow by 34% YoY, mainly driven by lower provisioning. Large private banks are expected to grow at a higher rate vis-a-vis mid-cap/small-cap peers and public sector banks.
For non-banking financial companies, we expect credit growth at ~16% YoY and 5% QoQ while profit after tax growth is expected at ~17% YoY.
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