Bank Net Interest Margins Continue To Experience Sequential Strain: CareEdge

CareEdge Research Report

Net Interest Income of select Scheduled Commercial Banks compared to previous quarter, saw a relatively slower growth of 9.7% YoY to Rs 2.03 lakh crore in Q1 FY25 driven by healthy credit growth, which was partially offset by rise in deposits costs and a dip in yields on advances.

• SCBs reported a robust rise in advances at 18.1% y-o-y in Q1 FY25 driven by the merger and personal loans.

• Meanwhile, SCBs witnessed a 13.7% YoY deposit growth for the quarter. Private banks’ deposits rose by 23.2% YoY while public sector banks registered a slower pace of 9.0%. Deposit growth lagged credit growth with sluggish current account and saving account growth (3.3% YoY), which was partially offset by the robust growth in Time Deposits (17.8% YoY). CASA ratio continued to decline and reached 32.3%.

• The Credit and Deposit ratio stood at 80.6% as of June 30, 2024, expanding by ~430 bps YoY over a year ago due to widening credit-deposit growth and HDFC merger impact.

The Net interest margin for SCBs dropped on a year-on-year basis by 13 bps and stood at 2.94%, as the rising cost of deposits along with slower growth in CASA impacted the NIM margin.

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