Banks, Insurance Q2 Results Preview - Earnings To Remain Resilient Despite NIM Compression: Motilal Oswal

BQ Prime’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 BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Motilal Oswal Report.Private Banks - Profit after tax to grow ~25% YoY in Q2 FY24 We estimate private banks (excluding HDFC Bank Ltd.) to report pre-provision operating profit growth of ~18% YoY (flat QoQ) and profit after tax growth of ~25% YoY (flat QoQ) in Q2 FY24. Earnings are poised to remain healthy, supported by healthy business growth and benign credit costs, but margin compression and elevated opex may pose challenges to the overall growth trajectory.Margins are expected to moderate further due to the rising cost of deposits and stagnating loan yields. However, healthy loan growth will continue to aid net interest income. We estimate NII growth of ~21% YoY (flat QoQ) in Q2 FY24, with IDFC First Bank Ltd. at ~31%, ICICI Bank Ltd. at ~24%, Kotak Mahindra Bank Ltd. at ~24%, IndusInd Bank Ltd. at ~18%, and Axis Bank Ltd. at 16% YoY.Slippages are likely to remain under control, which should drive continued improvement in asset quality ratios. The growth rate and the performance of unsecured loans will be key to watch out for in the medium term. Opex should remain high on account of branch expansion and technology related expenditure. Consequently, we expect the cost/income to stay elevated for most banks..Public Sector Banks – Earnings traction robust; estimate 20% YoY PAT growth in Q2 FY24 Earnings growth is likely to remain robust for PSBs in Q2 FY24, aided by controlled credit costs, though margins may moderate due to rising funding costs. PSBs are likely to deliver NII/PPoP growth of 12%/8% YoY and PAT growth of ~20% YoY.Opex is likely to remain elevated as banks provide for wage revisions. Treasury performance should be sluggish during the quarter due to an increase in bond yields after a robust Q1 FY24.Loan growth should recover on a sequential basis, led by improved corporate demand and ongoing traction in the retail and micro, small and medium enterprise segments.Asset quality improvement is likely to continue, while healthy provision coverage ratio and a sharp decline in special mention account asset pool will lead to further moderation in credit costs..Small Finance Banks – Mixed performance; NIMs to moderateWe expect AU Small Finance Bank Ltd. to report 25% YoY growth in loan book, which is lower than the average run rate as the bank continues with its sell-down approach.We estimate opex ratios to remain elevated (C/I ratio at ~63% for FY24), while margins may fall another 12 bp QoQ to 5.6% after a 38 bp decline in Q1 FY24. We estimate Q2 FY24 PAT to grow ~20% YoY to Rs 4.1 billion (29% compound annual growth rate in FY23-25E). Equitas Small Finance Bank Ltd. is likely to report a healthy quarter with 32%/65% YoY growth in PPoP/PAT and ~33% YoY growth in advances (5.5% QoQ). However, margins are likely to moderate by another 32 bp QoQ to 8.4%..Life Insurers: Premium growth healthy; value of new business margins broadly stable We expect premium growth to remain steady after a muted Q1 FY24. Demand for annuity, non-par and credit life segments is likely to fare relatively better, while protection is witnessing a gradual recovery. Premium growth: We expect HDFC Lfie Insurance Company Ltd./SBI Life Insurance Company Ltd./Max Financial Services Ltd. to post annual premium equivalent growth of 9%/29%/37% YoY in Q2 FY24, while ICICI Prudential Life Insurance Company Ltd. is likely to report tepid growth of 3% YoY.VNB growth: We estimate VNB growth of ~18% YoY for SBI Life, 8% for HDFC Life and 32% for Max Life. We estimate ICICI Prudential's VNB to remain flat YoY in Q2 FY24..Payments and fintech: Revenue growth to remain steadySBI Cards and Payment Services Ltd. - The momentum in credit card spending and new account sourcing is likely to remain healthy. Margins may remain broadly stable (slight downward bias), aided by rising mix of EMI loans. The credit cost may stay elevated due to higher delinquency from CY19 vintage, but it is expected to improve in H2 FY24. We estimate 23% YoY growth in earnings after a muted Q1 FY24.Paytm: We estimate Q2 FY24 gross merchandise value to grow 46% YoY to Rs 4.7 trillion, while the value of loans disbursed is likely to grow 135% YoY/16% QoQ to Rs 172 billion. We expect revenue from operations to grow 36% YoY to Rs 26 billion, while contribution profit is estimated to grow 72% YoY to Rs 14.5 billion (contribution margin of ~56%). We estimate Ebitda before Employee stock ownership plan costs to come in at Rs 1.75 billion..Top picks – ICICI Bank, IndusInd Bank, Bank of Baroda and SBI Life..Click on the attachment to read the full report:.Media Q2 Results Preview - Full House In Cinemas But Broadcasters Struggle: Prabhudas Lilladher.DISCLAIMERThis report is authored by an external party. BQ Prime 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 BQ Prime..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Banks, Insurance Q2 Results Preview - Earnings To Remain Resilient Despite NIM Compression: Motilal Oswal

Controlled slippages to keep credit cost benign.

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