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Prabhudas Lilladher Report
Banks under our coverage are expected to witness a weak quarter as core earnings could fall by 9.3% quarter on quarter to Rs 454 billion (versus -2.7% QoQ in Q1 2024), mainly driven by lower net interest margin.
Loan growth might come in at 3.7% QoQ (1.7% in Q1 FY24), while deposit accretion could be plus 3.5% quarter on quarter (2.1% last quarter). NIM contraction could be maximum this quarter (versus Q1 and H2 FY24) and we expect NIM to decline by 22 basis points quarter on quarter (-6 bps in Q1 2024) to 3.6%. IndusInd Bank Ltd. and Axis Bank Ltd. may see lower NIM contraction.
Fees could grow by 3.3% QoQ to Rs 315 billion while opex may spike by 6.6% QoQ to Rs 793 billion (due to seasonality in case of public sector undertaking banks). Core pre-provision operating profit may come in at Rs 729 billion (-7.7% QoQ).
IndusInd Bank, Axis Bank, and The Federal Bank Ltd. might perform better on core PPop. Slippage ratio might decline by 40 bps QoQ to 1.1% as Housing Development Finance Corporation Bank Ltd. and State Bank of India could see lower sequential delinquencies.
Banks' profit after tax is expected to be Rs 500 billion (-14.2% QoQ). Among our coverage universe we prefer HDFC Bank Ltd., State Bank of India and The Federal Bank.
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