Banks Q4 earnings preview: In line with Q3, a moderate quarter likely. Top stocks to buy
During the March quarter, private banks are likely to outperform public sector lenders as the latter were impacted by wage hikes in the said period.
JM Financial expects earnings for THE banking universe to grow just about 5% year-on-year for Q4. Private banks are seen leading the growth at 16.5%, while the same should be around 0.6% year-on-year for PSU banks.
«In a quarter impacted by tight liquidity and continued pressure on deposits, sequential decline in NIMs is a given – more so for private banks,» the brokerage said.
NII growth
Analysts see continued pressure on net interest income for banks during the fourth quarter on the back of moderating loan growth and NIM compression, though benign credit costs should somewhat cushion PAT growth.
ICICI Securities estimates NII for the banks under its coverage to grow by a marginal 1%, with HDFC Bank likely to report flattish NII quarter-on-quarter.
Asset quality
Banks are likely to witness yet another strong quarter in terms of asset quality. However, analysts said they remain vigilant of any pockets of stress in the unsecured portfolios.
«Slippages should remain under control and asset quality improvement will continue, driven by healthy recoveries. Credit costs are likely to remain at normalised level and reversal of AIF provisions for certain banks could lend some support to earnings,» said Axis Securities.
Loan growth and deposits
Based on the provisional updates released by banks thus far, along with the systemic growth momentum and considering Q4 as a
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