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Prabhudas Lilladher Report
With Reserve Bank of India hiking repo rate over May-August 2022 by 140 basis points to tackle inflation, Q2 earnings for frontline banks would be characterized sequentially by better margins, even as credit momentum would be sustained.
However, due to tight liquidity, deposit growth would be a key. We expect coverage banks to report a 4.0% QoQ loan growth, while deposit growth could be up 2.9%.
Net interest income growth may be 5.5% and net interest margin is expected to enhance by 9 bps QoQ to 3.74%. NIM expansion for private banks may be higher by 11 bps compared to 5 bps for public sector undertaking banks as proportion of repo linked loans is higher for private banks. Fees plus recovery income may be largely flat QoQ.
Opex could see a 4.6% QoQ growth that would be offset by superior NII accretion leading to a core pre-provision operating profit of Rs 683 billion (up 3.2% QoQ/18.5% YoY).
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