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Prabhudas Lilladher Report
Banks under our coverage are expected to witness a weak quarter, as core earnings could fall by 7.3% QoQ to Rs 463 billion (versus +0.1% QoQ in Q2 2024), mainly driven by reduction in net interest margin.
Loan growth might come in at 3.8% QoQ (4.3% in Q2 FY24), while deposit accretion could be +2.1% QoQ (3.9% last quarter). NIM contraction could moderate this quarter (versus Q2 FY24) and we expect NIM to decline by 5 basis points QoQ (-16 bps in Q2 FY24) to 3.62%. HDFC Bank Ltd,. IndusInd Bank Ltd. and Federal Bank Ltd. may see better NIM performance.
Fees could grow by 3.1% QoQ to Rs 333 billion while opex may increase by 3.4% QoQ to Rs 842 billion (seasonality in case of public sector banks).
Core pre-provision operating profit may come in at Rs 733 billion (-0.4% QoQ). HDFC Bank, IndusInd Bank and Federal Bank might do better on core PPoP.
Led by KCC, gross slippage ratio might see a slight 3 bps rise to 1.28% and we expect State Bank of India, HDFC Bank, ICICI Bank, Axis Bank Ltd. to report higher delinquencies. Banks' profit after tax is expected to be Rs 524 billion (-8.7% QoQ).
Among our coverage universe we prefer ICICI Bank and HDFC Bank.
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