Banks Q1 Preview- Seasonality To Ensue; Pressure On NII/PAT Growth But RoA To Remain Healthy: ICICI Securities

ICICI Securities Report

We estimate systemic loan growth to remain healthy at ~16% YoY/~2% QoQ while deposits should continue to lag at ~13% YoY (~2% QoQ versus 5% in Q4 FY24). We estimate 5–10 basis points QoQ dip in net interest margins for most of the banks due to adverse seasonality and cost of deposits inching up.

RBL Bank (uptick of 5 bps QoQ) and Kotak Mahindra Bank Ltd. (down ~15 bps QoQ) are likely to be outliers. Overall, we estimate NII growth for our private banks (excluding-HDFC Bank) coverage at ~15% YoY, lower than loan growth of ~17% YoY.

Opex is likely to soften a bit, but would remain firm, restricting operating profits growth at less than 10% YoY (and stable QoQ). While we model higher gross/net slippages QoQ across banks, it is mainly due to adverse seasonality QoQ (and is similar YoY), suggesting limited impact from election-related disruptions.

Despite pressure on profit after tax growth, we expect healthy return ratios for most of the banks.

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