Healthy loan growth, stable slippages, 19% revenue jump expected

India Inc’s earnings season got off to a positive start with two major IT companies, TCS and Infosys, reporting strong results for the March 2022 quarter this week. Now the banking sector will also start reporting financial results, the the country’s largest private sector lender, HDFC Bank, announcing its fourth quarter results on April 16. Here’s what analysts expect from this lender and the industry as a whole:

“(India Inc)’s (India Inc) adjusted PAT (profit after tax) is expected to grow by 32% year-on-year, largely driven by strong performance by banks,” YES Securities said in a report adding that the banking sector is expected to post a revenue growth. 19.2% year-over-year in the fourth quarter ended March 2022.

Russian-Ukrainian war: will it have an impact?

With respect to asset quality, new bank slippages in the March 2022 quarter will generally be flat to lower on a sequential basis and some incipient underlying tension may have formed due to the third wave of Covid-19 and due to disruptions caused by Russia. – Ukrainian war, says the report. “The impact of the Russian-Ukrainian war should not be widespread and severe.”

Among major banks, the report said analysts see a sequential increase in provisions for Axis Bank and Kotak Mahindra Bank, and a slight increase for SBI. “On the other hand, we are seeing lower provisions for ICICI, BOB and HDFC Bank.”

Regarding the net interest margin, the report indicates that unlike the last quarters, considerations surrounding interest reversals would be a less important factor affecting the sequential evolution of the NIM, as the sequential delta of the slippages would be lower. in 4QFY22 compared to recent quarters. “That being said, we are seeing a significant decline in slippages for IndusInd Bank and Federal Bank. The other thing to keep in mind is loan allocation.”

He also said sequential loan growth should be reasonably healthy in 4QFY22 as retail disbursements will have picked up after a relatively unimpacted third wave of COVID-19. Wholesale lending growth would also be strong given the improving business lending environment. “For IndusInd Bank, there would be a significant acceleration in corporate lending.”

HDFC Bank’s fourth quarter results on April 16: what to expect

On HDFC Bank’s earnings expectations, it said slippages are expected to decline sequentially due to underlying factors. Net interest margin is expected to be slightly lower on a sequential basis as wholesale lending generally outpaces retail lending. “Commission income would only be slightly higher due to slow card fees. Treasury earnings would be subdued due to a rise in bond yields. Provisions would be lower sequentially.”

The bank is expected to record an after-tax profit of Rs 11,298 crore in the March quarter of 2022, a jump of 38% from the prior year. Its net interest income could rise by 14.7% to Rs 19,636 crore in the quarter, according to the YES Securities report.

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