NBFCs Q3 Results Preview - NIM Compression Likely; Unsecured Lending Growth To Taper Off: Nirmal Bang

Nirmal Bang Report

While overall momentum in disbursements remains strong, we expect unsecured lending to start moderating in Q3 FY24. We expect our coverage universe to see continued pressure on net interest margins with a further rise in the cost of funds; housing finance companies are likely to be somewhat insulated as they are excluded from the purview of the new Reserve Bank of India norms.

We reiterate Shriram Finance Ltd, and Aavas Financiers Ltd. as our top picks in the non banking financial company space.

While asset quality trends remain stable, stress is visible in certain pockets such as tractor finance/fintech lending.

In our view, following will be the key monitorables from Q3 FY24 results of NBFCs –

1. Growth guidance, especially for the unsecured loan portfolio,

2. net interest margin compression,

3. asset quality and collection efficiency trend.

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