Banks Q2 Results Preview - Loan, Deposit Growth Likely To Improve: PL Capital

PL Capital Report

Banks under our coverage are expected to witness a better quarter compared to Q1 FY25 led by private banks due to higher fees and lower provisions sequentially. Core earnings could see a slight uptick of +1.7 QoQ to Rs 554.7 billion (versus -4.7% QoQ in Q1 FY25).

Loan/deposit growth is expected to pick up given Q1 is seasonally weak, and we envisage a growth of +3.4%/+3.8% QoQ (+0.9%/+0.0% in Q1 FY25). LDR may fall by 33 bps QoQ to 85.1%, mainly due to HDFC Bank (-374 bps QoQ), while net interest margin is likely to contract by 3 bps QoQ (versus +5 bps in Q1 FY25) to 3.59%.

Federal Bank, City Union Bank, DCB Bank and IndusInd Bank may report better NIM movement. Fees might bounce back, growing 6.2% QoQ, to Rs 357 billion (versus -9.0% QoQ), which would be offset by rise in opex to Rs 851 billion (+6.3% QoQ).

Core pre-provision operating profit may come in at Rs 868.3 billion (+2.0% QoQ). HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank and Federal Bank may outperform on core PPoP.

Gross slippage ratio might improve by 24 bps QoQ as Q1 usually sees a sharp spike in agri slippages. Banks’ PAT is expected to decline by 1.5% QoQ to Rs 609 billion. Among our coverage universe, we prefer ICICI Bank and HDFC Bank.

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