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Dolat Capital Report
Banks are expected to report a strong quarter, benefitting from improving loan growth, net interest margin expansion, and low credit costs.
Consequently, net interest income is expected to grow at 14% YoY and 5% QoQ. NIM will benefit from both repricing of external benchmark lending rate linked loans and utilisation of excess liquidity.
Operating profits will also benefit from part reversal of mark-to-market losses for some banks. Moreover, low credit costs should drive profit after tax growth of 56% YoY.
We factor in loan growth of 19% YoY for the coverage universe in Q2 FY23. Asset quality trends are like to remain stable, with continued moderation in gross non performing asset ratios.
Affordable housing financiers under coverage should continue to see healthy growth trends of 6% QoQ and 29% YoY. Recent rating upgrades will limit rise in cost of fund, with margins stable to marginally higher QoQ.
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