Banks to see margin pressure amid hike in deposit rates; IndusInd Bank, Axis Bank to defend NIMs better: Jefferies

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Also Read: Bank FD rates: Kotak, Axis, IDBI Bank revises fixed deposit rates. Details here Meanwhile, hikes in MCLRs has been relatively divergent across banks. Over the past few months, the brokerage noted, larger PSU banks have taken lower hikes in MCLRs as compared to smaller PSUs and private banks, mostly targeted to gain market share in corporate loans.

Jefferies estimates that banks like IndusInd Bank and Axis Bank have seen the majority of the hikes in term deposit rate pass-through to P&L and hence should see lower cost pressures. “On the other hand, larger banks like ICICI Bank and larger PSU banks could see higher cost pressures over the next two to three quarters. For HDFC Bank, merger with HDFC Limited and impact of incremental Cash Reserve Ratio (I-CRR) will have a higher impact than purely gaps in rate hikes," Jefferies said.

Kotak Mahindra Bank is also benefiting from an increase in share of higher-yielding unsecured loans, it noted. The brokerage expects banks like IndusInd Bank to be able to sustain margins near the current range, while Axis Bank may see 10-15 bps compression, whereas ICICI Bank and SBI may see about 30-40 bps compression over next two to three quarters. Also Read: HDFC Bank share price extends decline; stock falls over 7% this week Additionally, divergence in NIMs could lead to divergence in pre-provision operating profit (PPOP) growth over coming quarters, which may be reflected in near-term stock performances also.