Banking sector Q4 preview: PSU Banks to continue to post better earnings growth than private banks, says Elara

livemint.com:

Q4 Results Preview | Telecom cos to report moderate growth on ARPU upgrades; Bharti Airtel, Jio to lead the pack According to the report, banks are at an unusual junction wherein frontline names have underperformed. With outperformance by other private and mid-tier PSU banks, the valuation gap between mid-tier and frontline has narrowed. “We retain our neutral stance on banks; hereafter, the riskreward may be tilted toward frontline peers.

No significant asset quality challenges and better growth may ensure sustained rerating for PSU banks on earnings stability – with SBI being our top picks," it added. The firm estimates net interest income (NII) for its banking coverage universe to grow at nearly 8.3 per cent YoY during Q4FY24, adding that NII growth to be soft and low credit cost to drive earnings trajectory. Also read: HDFC Bank Q4 Update: Gross advances rise 55% YoY to ₹24.69 lakh crore; deposits grow 26%; share price gains 3% Large private banks are likely to post 15.5 per cent year-on-year (YoY) growth in NII, meanwhile, mid-size banks likely to post 6.6 per cent growth and PSU Banks to witness 1.1 per cent in Q4FY24.

In terms of profit after tax (PAT), PSU Banks to lead the chart with 17.9 per cent quarter-to-quarter (QoQ) growth expected in Q4 FY24. Whereas, private banks are likely to post of 0.1 per cent and mid size banks to post 1.9 per cent growth. According to the report, HDFC Bank and Kotak Mahindra Bank are likely to witness a steady NIM growth.