Banks - NIM Compression Along With Improving Asset Quality Continues In Q4: CareEdge

CareEdge Research Report

In Q4 FY24, the Scheduled Commercial Banks reported a robust rise in advances at 20.2% YoY driven by merger and personal loans. The corporate sector too saw a gradual pickup, aided by MSMEs. Meanwhile, SCBs witnessed a 13.3% YoY deposit growth for the quarter. Deposit growth has continued to lag credit growth. Consequently, the Credit to Deposit ratio stood at 80.01% as of March 31, 2024, expanding by ~416 bps YoY.

Net Interest Income grew by 10.2% (YoY) due to healthy loan growth despite a decline in net interest margin by 16 bps.

Net non-performing assets reduced by 23.8% YoY. The NNPA ratio of SCBs reduced to 0.6% which is an all-time low.

SCB credit cost (annualised) declined by 10 basis points (bps) YoY to 0.54% as banks have been cleaning their balance sheets.

Return on assets (annualised) improved by 7 bps YoY to 1.39% owing to robust business growth, relative growth in other income (treasury and fee) and controlled provisions.

SCBs were adequately capitalised. SCBs CET I Ratio came in at 14.2%, while the capital adequacy ratio came in at 16.6% in March 2024 end, compared to regulatory requirements of around 8% (capital conservation buffer and 11.5% respectively.

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