Seasonal weakness, higher cost of funds to weigh on bank numbers
Banking sector set to shock investors with a dramatic drop in profits for June quarter! NII growth expected to slow down, squeezing margins and impacting net profit. Find out which banks are facing the biggest hit and how this could affect the sector's re-rating!
ET Intelligence Group: The is expected to report a muted performance for the June 2024 quarter on sequential basis given weakness related to general elections and heatwave and a strong base growth in the previous quarter. The six banks in the Nifty 50 index are expected to report 1.7% sequential increase in the (NII) at the aggregate level, according to the average of the estimates by ETIG and six brokerages. It would be lower than the 3.5% growth seen in the previous quarter. On year-on-year basis, NII is likely to grow by 13% in the June quarter, faster than the 10.8% growth in the previous quarter.Despite an improvement in NII, the (PPOP) and net profit for the sample are expected to decline by over 8% sequentially reflecting a squeeze on net interest margin (NIM). According to Axis Securities, the unabated focus on has resulted in higher competitive intensity amongst banks. "With continued deposit re-pricing weighing on (CoF) coupled with limited loan re-pricing opportunities, we expect banks to continue reporting in the June quarter," the brokerage mentioned in a preview report.
is likely to post the steepest fall of 15% sequentially in PPOP at ₹24,875 crore followed by (SBI) which is expected to report nearly 10% drop in PPOP at ₹25,891.6 crore.
ETMarkets.comCost of Funds to Weigh on Bank Nos
On the other hand, PPOP for and may grow by 2.1% and 3.3% to ₹15,350.2 crore and ₹4,160.2 crore respectively. Elara Securities (India) pointed out three factors for including continued repricing on back deposit book, sticky incremental deposit costs, and higher interest income reversal given higher Agri slippages for some banks.
Each of the six banks is likely to report a sequential fall in net profit for the June quarter; the steepest 15.8% drop is likely to be reported by SBI at ₹17,425.1 crore, followed by the 11.5% fall by at ₹3,660 crore.
According to JM Financial Institutional Securities, of banking stocks remain close to long-term averages and banks remain one of the few pockets of value.
“Notwithstanding the valuation argument, we see NII and PPOP growth, and to be more critical factors for sector re-rating,” said the brokerage in a report. Its key are ICICI Bank and .
Source: Stocks-Markets-Economic Times
