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Nirmal Bang Report
We expect a weak operating profit growth (YoY) for banks in Q2 FY21 coupled with elevated provisioning trends.
Our unadjusted profit after tax numbers for bank's coverage indicate a growth of 67.5% YoY and 29.5% QoQ.
But, we do not read too much into this ‘improvement' as the asset quality outcome, due to the pandemic, still remains uncertain.
Focus will shift from assessing moratorium numbers to quantum of restructuring.
Though moratorium numbers had started to fall in Q2 FY21, we believe that the crystallisation of actual non-performing asset formation, due to the pandemic, is still about six months away. Therefore, the asset quality picture still remains guesswork.
Across our banks and non-banking financial companies coverage, we expect average credit costs of 1.9% (up 61 basis points YoY, down16 basis points QoQ).
Credit growth is likely to remain subdued, as suggested by latest trends/data.
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