BFSI Q3 Results Preview - Muted Operating Profits; Steady Growth, Asset Quality Metric: Dolat Capital

Dolat Capital Report

Despite healthy growth trends and low credit costs, earnings for banks will be impacted by continued moderation in net interest margin and elevated opex. Net interest income growth for coverage banks is expected to grow at 1% QoQ and 8% YoY (Excluding HDFC Bank Ltd. YoY).

Operating profit is expected to be up 1% QoQ and decline YoY by 4% (ex-HDFC Bank) as public sector banks make retrospective adjustments for wage hike. Profit after tax growth will be slightly higher at 5% YoY (ex-HDFC Bank) driven by low credit costs.

Despite muted PAT growth, profitability metrics or return on assets remain healthy for the sector as NIM moderation is off a high base. We factor in loan growth of 16% YoY and 4% QoQ for banks under coverage.

Affordable housing financiers are expected to report robust growth trends at 6% QoQ, along with improving asset quality.

Moderation in spreads will be partly offset by loan mix change. Gold loan non-banking financial companies will face a seasonally weak quarter, but yields should be steady.

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