Banks, Insurers, Asset Managers, Brokers, Fintech Q2 FY25 Earnings Preview: Yes Securities

Yes Securities Report

Banks

Asset quality: Fresh slippages in Q2 FY25 would generally be broadly stable on sequential basis for our coverage banks. We see slippages for most banks to remain at similar levels, sequentially, in Q2 FY25 as the residual restructured book will be reasonably well behaved.

Furthermore, the macro environment due to elevated interest rates has already caused some incipient build-up of stress but slippages should broadly stabilize at these levels.

For few banks slippages will be lower due to seasonality. Sequential evolution of provisions would be a function of not only slippages but also of recoveries and upgrades and preexisting provision buffers.

Hence, we see a meaningful rise in provisions, sequentially, for Bank of Baroda and RBL Bank Ltd. and a marginal rise for DCB Bank Ltd. and City Union Bank Ltd. whereas we see flattish trend in provisions for HDFC Bank Ltd. and Indian Bank Ltd.

Provisions would decline sequentially for CSB Bank, SBI, Axis Bank, Kotak Mahindra Bank, Federal Bank, ICICI Bank, IDFCF Bank, IndusInd Bank and Karur Vysya Bank.

Life Insurers

New business growth:

Growth trend for two-months Q2 FY25 (July and August 2024) is publicly available on the IRDA website and we expect new business growth for the whole of Q2 FY25 to be broadly along similar lines, penciling in QoQ APE growth of 52%, 43%, 34%, 29% and 10% for Max Life, SBI Life Insurance, ICICI Prudential, HDFC Life and LIC respectively due to seasonality.

New business margin:

We expect value of new business margin to expand 250bps QoQ for Max Life, 160 bps QoQ for LIC and 15 bps QoQ for SBI Life due to idiosyncratic reasons. We expect VNB margins to remain largely similar sequentially for ICICI Prudential and HDFC Life.

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