NBFCs Q2 Preview - Strong Loan Growth To Drive Earnings: Prabhudas Lilladher

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Prabhudas Lilladher Report

We expect non-banking financial companies under our coverage universe to report robust earnings, given strong assets under management growth of ~4.19% QoQ led by strong vehicle financiers (commercial vehicle upcycle) and gold financiers (gold AUM) performance.

NBFCs should be able to slightly improve their QoQ margins by ~10.48% (versus 10.18% in Q1), given strong disbursements normalising liquidity thereby negating rising cost of funds.

However, with further repo rate hikes (190 basis points rise already announced in May-October 2022) margin pressures may come into play.

Credit demand can also be affected if the rate hikes do not slow down. We expect better asset quality with pick-up in collections across board, now reaching at pre-Covid levels for most companies. Credit costs should be flattish on QoQ basis and not see any negative surprise, in our view.

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