Banking Q2 Preview: Banks are expected to show healthy profitability for the July-September quarter as core income growth is powered by a jump in loan disbursals, and the initial benefits of a rising interest rate cycle boost margins. The sharp hike in policy rates by 190 basis points since May and its transmission will result in a higher net interest income (NII), and hence, a better net interest margin (NIM).
Analysts expect listed banks to report aggregate net profit growth of more than 40 per cent for the second quarter, led by a healthy 18-20 per cent growth in net interest income.
Gaurav Jani – Research Analyst, Prabhudas Lilladher Pvt Ltd, said: “We expect private banks could report NII growth of 21 per cent from the year earlier, as both NIM and credit growth could report an uptick quarter-on-quarter. Loan growth in line with the system can also be seen in public sector banks, while NII increase may stand higher at 15 per cent. In the second quarter, HDFC Bank saw 24 per cent year-on-year loan growth with retail growing 22 per cent, commercial-rural 32 per cent, and wholesale 26 per cent.”
According to the analysts at Kotak Institutional Equities, NIMs are likely to improve as the loans linked to MCLR/EBLR have begun to reprice reflecting the new policy rates. Also, there are no concerns about the treasury losses in this quarter unlike the previous one. All banks are likely to see strong loan growth unlike the previous quarter.