INSUBCONTINENT EXCLUSIVE:
MUMBAI:The June quarter performance at Indian lenders could be tepid due to low earnings or losses in bond portfolios, higher provisions
because of the ageing in bad loans, and low capital positions that continue to straitjacket growth at PSU banks
research analyst at SMC Institutional Equities
least 50bps during the June quarter, potentially driving markto-market provisions higher, the central bank nod to amortise losses over four
quarteRs should give banks the much needed support.
Morgan Stanley expects strong earnings at retail banks, driven by strong growth and
broadly stable margins, with improving cost to income ratios and stable asset quality
For corporate lendeRs , pre-provision operating profit will be relatively muted, given lower sequential margins and muted loan growth.
What
The recoveries should lead to improvements in both impaired loans and coverage.
But tough times will continue for state-run banks that,
according to rating agency ICRA, will report loss before tax of Rs 41,900 crore -Rs 1.01 lakh crore during FY19, depending on the haircuts
they may have to take on stressed assets undergoing resolution
This compares with a loss before tax of Rs 1.3 lakh crore that PSBs reported in FY2018.
ICRA has estimated an additional Rs 3.8 lakh crore
cases undergoing resolution except for accounts belonging to the steel sector and a high share of power sector exposure in 70 large
ratings, ICRA.
Gross NPAs for the industry increased by Rs 1.38 lakh crore from Rs 8.79 lakh crore to Rs 10.16 lakh crore at the end of the
Of the incremental NPAs, about 85 per cent of the additions came from PSU banks and consequent provisions have weakened their capital
positions.
HDFC Bank, for its part, should report 20 per cent loan and PAT growths, backed by strong retail-led lending and lower credit
The ongoing leaders hip crisis at ICICI Bank could remain an irritant, but the private sector lender could see an overall business growth of
Its slippages are expected to moderate but stay high, the bulk of which will emerge from the watch-list and existing impaired loans.
For
Axis Bank, credit costs will remain high as guided by the bank in the past, but the key metric to watch will be slippages outside of the
current stressed accounts and potential additions to BB and below rated accounts.
State Bank of India is expected to report moderate loan
growth and an elevated level of slippages from its corporate watch-list
But strong recoveries helped by NCLT resolutions will help the bank improve its coverage on overall loans.
