INSUBCONTINENT EXCLUSIVE:
Mumbai: Banks, particularly private lenders, are likely to post better performance in December quarter report cards, helped by robust
recovery from NCLT (National Company Law Tribunal) resolutions, though credit demand remains tepid.
On the other hand, non-banking finance
companies (NBFCs) may see a weak quarter
While liquidity has improved, weak vehicle sales and moderate housing volumes will translate into weak loan growth at most NBFCs/HFCs
(housing finance companies)
will be in the limelight on the back of strong recovery from NCLT resolutions driving earnings, an improvement in asset quality, lowering of
note.
The banking sector is expected to witness continued weakness in growth in 3QFY20, with domestic growth projected at 2 per cent
quarter-on-quarter (QoQ) and 7 per cent year-on-year (YoY), latest RBI data showed.
They pointed out that a few vectors to watch will be
PCRs (provision coverage ratios) post recoveries, non-corporate segment slippages, Casa (current account savings account)/retail deposits
lower provisioning, strong recoveries in a couple of accounts from NCLT resolutions and PCR getting into comfort zone.
Analysts at Motilal
Oswal Financial Services (MOFSL) expect core profitability for private banks to continue improving
It estimates private banks to report operating profit growth of around 15 per cent YoY.
MOFSL estimates private banks to deliver 40 per cent
YoY PAT growth, led by stable opex, moderation in credit cost, recoveries in select large NCLT cases such as Essar Steel, Ruchi Soya and the
like, and a lower tax outgo.
The brokerage expects ICICI Bank to report a 146 per cent YoY increase in net earnings and also a healthy 20
(mainly caused by stressed HFCs) and divergence in GNPLs are likely to keep credit costs elevated, but lower opex run-rate and higher
recoveries from NCLT resolutions are likely to cushion earnings.
The brokerage expects public sector banks (PSBs) to deliver YoY NII growth
of 15% and PAT growth of 36 per cent, mainly led by strong earnings recovery in SBI
volatile earnings growth, primarily due to inconsistencies between banks in the recognition of recovered amounts in a few large corporate
NPL cases and lower tax rate, as DTA costs were adjusted for private banks in Q2FY20 while the status of the same for public banks is
has slowed to around 7% year on year, which would put pressure on revenue growth, and we expect the decelerating trend to be more visible on
which are seeing a steady improvement in core performance.
Kotak expects most NBFCs to deliver single-digit growth in core PBT due to weak