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Prabhudas Lilladher Report
Banks under our coverage are expected to witness a weak quarter, as core earnings could fall by 4.1% QoQ to Rs 549 billion (versus +11.6% QoQ in Q4 FY24), driven by rise in credit costs. Loan and deposit growth may be soft due to seasonality and might come in at +0.6%/+0.8% QoQ (+3.7%/+5.3% in Q4 FY24).
Loan-to-deposit ratio may be largely stable QoQ at 84.6%, while net interest margin is likely to contract by 2 bps QoQ (versus 8 bps in Q4 FY24) to 3.55%. Axis Bank Ltd., IndusInda Bank Ltd. and HDFC Bank Ltd. may see better NIM performance.
Owing to seasonality in case of PSU banks, fees for could fall by 5.0% QoQ to Rs 350.3 billion which would be offset by lower opex at Rs 820 billion (-3.0% QoQ).
Core pre-provision operating profit may come in at Rs 849 billion (+1.1% QoQ).
State Bank of India, Bank of Baroda and Axis Bank might outperform on core PPoP. Gross slippage ratio might slightly increase by 6bps QoQ as Q1 usually witnesses agri slippages. Banks' PAT is expected to decline by 10.7% QoQ to Rs 602 billion.
Among our coverage universe, we prefer Axis Bank.
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