BQ Blue's special research section collates quality and in-depth equity and economy research reports from across India's top brokerages. These reports offer BloombergQuint's subscribers an opportunity to expand their understanding of companies, sectors and the economy.
ICICI Securities Report
Deciphering the trends in banks' marginal cost of funds-based lending rate (MCLR), deposit rates, lending spreads (both over deposit rates as well as outstanding over marginal rates), asset mix change and stress recognition, we fear more downside risk to banks' net interest margin (NIM) trajectory.
What can drag NIMs down -
1. Spread of outstanding over-marginal loan yields has widened to as high as more than 180 basis points/100 basis points for private/public sector undertaking (PSU) banks;
2. lending spread (average lending rate over deposit rate) at its peak ever at 470 basis points (for private banks) poses a downside risk;
3. loan to deposit ratio moderating to 72%;
4. portfolio mix shift towards better-rated low yield lending; and
5. recognition of stress, interest derecognition and downward loan repricing (under restructuring scheme).
Nonetheless, hopes are on benefit of low deposit rates - though flexibility to further tweak seems limited and lower spread (outstanding over marginal) suggests limited repricing benefit.
All in all, pressure on NIMs appear imminent; we are revising NIM estimate down by 5-15 basis points in FY21/FY22 across our coverage universe.
Click on the attachment to read the full report:
DISCLAIMER
This report is authored by an external party. BloombergQuint does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the brokerage and do not represent the views of BloombergQuint.
Users have no license to copy, modify, or distribute the content without permission of the Original Owner.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
