Banking: Is Profitability At The Peak? CareEdge Analysis

"NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..CareEdge Research Report.Over the last two years, there has been a pick-up in economic growth and banks have witnessed credit growth at a compound annual growth rate of 18.2% from March 2022 to December 2023. Banks had surplus liquidity generated through deposits at a relatively lower cost during the Covid period. Which were utilised to fund the credit growth thus enabling banks to improve net interest margin. This, along with low credit costs, helped banks to report strong profitability during FY23. RBI had increased interest rates from May 2022 to till date by 250 basis points which to a certain extent were passed on to the customers. With the central bank removing the accommodative stance, there is a tightening of the money supply in the economy. The tightening of liquidity along with a lag in the deposit growth vis-a-vis credit growth is increasing the cost of funding of banks thereby impacting the NIMs during Q3 FY24 and is likely to keep the margin under pressure over the next two to three quarters. Additionally, banks have spent heavily on technology and branch expansion and have seen an increase in employee expenses, especially public sector banks due to the wage revision and pension liability which has led to an increase in the cost-to-income ratio of the overall private and public sector banks from 48.4% in FY20 to 50.6% in Q3 FY24. Thus, with the increasing cost of funds, elevated cost-to-income ratio and continued lag of deposit growth visa-vis the pace of credit expansion, we expect the return on total asset to decline slightly during FY25..Click on the attachment to read the full report:.RBI Monetary Policy Preview - A Balanced Policy With Focus On Liquidity: CareEdge Analysis.DISCLAIMERThis report is authored by an external party. NDTV Profit 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 author entity and do not represent the views of NDTV Profit..Users have no license to copy, modify, or distribute the content without permission of the Original Owner."

Banking: Is Profitability At The Peak? CareEdge Analysis

Credit growth remains strong, with personal loans outpacing other sectors

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Banking: Is Profitability At The Peak? CareEdge Analysis

Credit growth remains strong, with personal loans outpacing other sectors

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