Banking Q2 Results Preview - Healthy NII, PAT Growth On YoY-Basis, But QoQ Pressure Rising: ICICI Securities

ICICI Securities Report

We see Q2 FY24 to be broadly similar to Q1 FY24 wherein for private banks (excluding HDFC Bank Ltd.) under coverage, we see healthy net interest income/pre-provision operating profit/profit after tax growth on a YoY-basis at around 15/12/17%, but expect QoQ growth to be under pressure at around 1/-3/-4%.

For State Bank of India, we see return on asset moderating slightly to ~1% (versus 1.2% QoQ) due to slight pressure on net interest margin, opex and lower treasury gains.

We estimate ~3.6% QoQ and 17.5% YoY credit growth for private banks (excluidng HDFC Bank).

NIM had already peaked in H2 FY23 and we estimate upto 10 basis points QoQ moderation for Axis bank Ltd., Bandhan Bank Ltd., Yes Bank Ltd., SBI etc., but see a 15–20 bps dip for Kotak Mahindra Bank Ltd., Karur Vysya Bank Ltd., South India Bank Ltd., etc.; we estimate flattish to positive bias QoQ for RBL Bank Ltd., City Union Bank Ltd. and Federal bank Ltd.

We see slippages and credit costs to remain benign and see improvement in gross non-performing asset/net non-performing asset ratio QoQ for almost all banks.

Despite soft profit after tax QoQ, we see continued strong headline return on asset/return on equity for most of the banks.

We see strong Q2 FY24 from IndusInd Bank Ltd., Karur Vysya Bank, City Union Bank and DCB Bank Ltd. and expect relatively soft quarter for Bandhan Bank, Kotak Mahindra Bank and South Indian Bank.

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