The banking sector is anticipated to report a strong performance in the March quarter (Q4FY23) of fiscal year 2022–2023, driven by robust loan growth, margin expansion, and declining credit costs.
Sharekhan by BNP Paribas, a domestic brokerage firm, stated: “We remain watchful on margin guidance going forward as we are closer to peaking of margins for banks.”
According to the brokerage and research firm Prabhudas Lilladher, banks’ core earnings are expected to increase by 10.5 percent quarter on quarter (QoQ) to $496 billion, compared to +3.8 percent quarter on quarter (QoQ) in the preceding quarter, primarily due to lower provisions.
The brokerage expects the NIM for banks to increase by 7 basis points quarter-over-quarter to 4.2%, compared to +23 basis points in the previous quarter. Prabhudas Lilladher stated that ICICI Bank and Kotak Mahindra Bank could be outliers in terms of NIM expansion.
It added that provisions may fall by 8 bps quarter-over-quarter to 79 bps. “Banks’ PAT is anticipated to reach $528 billion (+4.8 percent QoQ),” the brokerage firm said, naming ICICIB, SBI, and DCB as its top selections. It was stated that key observables would include guidance on deposits and NIM.
While Motilal Oswal anticipates a stable, positive margin bias in 4QFY23, the rise in deposit costs and additional rate increases will impact the margin trajectory in FY24. The brokerage anticipates that margins will experience some pressure in FY24.
Amid the challenging macro environment, elevated inflation, and a high base effect, brokerages will also be alert for any changes in the demand environment.
Below is the list of large, mid-tier, small private banks & PSBS to buy or hold –
Large Private Banks
HDFC Bank (Buy)
ICICI Bank (Buy)
Axis Bank (Buy)
Mid-Tier Private Banks
Kotak Mahindra Bank (Buy)
Indusind Bank (Buy)
Federal Bank (Buy)
Bandhan Bank (Neutral)
Small Private Banks
AU SFB (Buy)
CUBK (Hold)
DCB Bank (Buy/Neutral)
PSBs
SBI (Buy)
PNB (Buy)
BOI (Hold)
The views and recommendations made above are those of individual analysts or broking companies, and not of Business Headline.