Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  
Google
Web www.equitybulls.com
Research

| More

ICRA expects banking sector to stay resilient, outlook remains Positive

Posted On: 2023-09-14 18:03:22 (Time Zone: IST)


ICRA continues to maintain a Positive outlook on the banking sector on the expectation that credit growth would remain meaningfully strong, thereby driving earnings growth. While the upward repricing of the deposit base is likely to lead to a moderation in the interest margin, benign asset quality pressures would support lower credit costs and earnings. Accordingly, in ICRA's view, the banking sector is expected to continue generating sufficient internal capital to largely meet its growth needs while improving the capital cushions. The retail segment is likely to remain the key contributor to credit growth although the sustainability of asset quality hinges on macro-economic conditions remaining favourable.

Commenting further, Mr. Anil Gupta, Senior Vice President & Co-Group Head, ICRA said: "Credit growth remains robust despite some moderation. Even at the anticipated pace of growth for FY2024, incremental credit expansion would be the second highest ever at Rs. 16.5-18.0 trillion, next only to the record level of Rs. 18.2 trillion (+15.4%) last year."

ICRA expects the headline metrics of the banking sector to remain on an improving trajectory on the back of controlled net additions (net of recoveries and upgrades) to non-performing advances (NPAs) and reasonably strong credit growth. Accordingly, ICRA expects the gross NPAs (GNPAs) and net NPAs (NNPAs) to decline to 2.8-3.0% and 0.8-0.9%, respectively, by March 2024 from 3.96% and 0.97%, respectively, as on March 31, 2023, which would remain the best in more than a decade. Notwithstanding this, ICRA remains cautious about the impact of macro-economic shocks on the asset quality, if these were to materialise.

Credit costs are estimated to remain at 1.0% of advances in FY2024, in line with FY2023. This should allow banks to comfortably withstand a compression of 20-25 bps in the interest margins, which would lead to a mild moderation in the return on assets (RoA) to 1.0% in FY2024 from 1.1% in FY2023. At these levels, the RoE would remain healthy at 13.0-13.1% in FY2024 against 13.8% in FY2023.

Furthermore, supported by internal capital generation and lower NNPA levels, the capitalisation and solvency profiles of private and public sector banks would remain comfortable. ICRA projects the Tier-I capital of the banking sector at 14.6-14.7% (14.4% as of March 2023) and an improvement in the solvency levels to 7% (8% as of March 2023) by March 2024.

Over the last decade, credit growth in the retail segment remained buoyant and a key driver of overall credit expansion. As retail growth outpaced other segments, its share in bank credit rose to 32% as on March 31, 2023 from 18% in March 2013. Moreover, the corporate book witnessed underperformance in recent years, including weaker asset quality levels and muted expansion, resulting in slower growth trends relative to the retail segment.

The Covid-19 pandemic was a stress test event on the asset quality across segments and defaults and losses were relatively higher in the unsecured segments. With more insight on the borrowers' repayment behaviour during the pandemic, lenders can take better decisions while growing unsecured retail loans. Moreover, the retail segment continued to report resilience despite volatile macro-economic conditions, including rising interest rates and surging inflation, which impacted disposable income.

Mr. Gupta added: "Even as the retail segment has performed well, the material weakening of macro-economic conditions could exert pressure on the debt-servicing abilities of borrowers and we remain watchful of its impact on the asset quality of lenders. Nonetheless, banks have strong operating profits and capital positions. Consequently, they are much better placed at present for navigating through such a scenario."


Click here to send ur comments or to feedback@equitybulls.com

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only. www.equitybulls.com, its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. www.equitybulls.com or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.





Other Headlines:

CRISIL Ratings: Complex fertilisers volume to grow 4-5% next fiscal

Issuances of securitised debt instruments (SDI) by corporate entities to rise to Rs 100 crore in FY2024: ICRA

Godrej Interio's 'HomeScapes' Study reveals Indians want ‘Me-Time’ at home

GDP growth to moderate to 6.0% in Q3 FY2024, led by agriculture and industry: ICRA

Indian stock exchanges rank first in the world in terms of the number of IPOs in 2023

CRISIL Ratings: After soaring this fiscal, airlines to land >20% operating profit growth next fiscal

Rising frauds propel demand for AI/ML strategies: Experian Study

Cement makers to add 150-160 MTPA capacity by fiscal 2028 - CRISIL

Investor exuberance propelling broking industry performance, MTF achieves a new high: ICRA

CRISIL Ratings: Securitisation volume up ~20% in first nine months of this fiscal

India is fastest growing large economy globally in CY2023-CY 2024 - Pantomath Report

CRISIL Ratings: Market share of gold-loan NBFCs steady despite bank competition

CRISIL Ratings: Vehicle loan AUM to vroom past Rs 8 lakh crore next fiscal

45% of Newbie traders claim that 'not knowing enough' is the primary reason for losses incurred in Futures & Options trading - Sharekhan's survey reveals

CRISIL Ratings: Agri pump makers to see 7-9% revenue growth next fiscal

Indian mutual fund industry likely to sustain its strong inflows in 2024: ICRA Analytics

CRISIL Ratings: Operating profit of offshore rig operators to swell 30% next fiscal

CRISIL Ratings: Organised F&G retailer revenue to grow in mid-teens next fiscal

CRISIL Ratings: Shippers see a further revenue dip of 5-7% next fiscal as charter rates course correct

82% of professionals are concerned about job redundancy due to emerging technologies: Hero Vired Report

UPI transactions witnesses 118% rise at retail stores in 2023: PayNearby Report

Happy Forgings Limited - IPO - A trusted supplier for several Indian and Global OEMs - Reliance Securities

CRISIL Ratings: Penetration of electric buses set to double next fiscal

India's refined copper consumption to grow by 11% in FY2024, despite global headwinds: ICRA

CRISIL Market Intelligence and Analytics - Curb on cane juice for ethanol - Sugar output lift

Stable Repo Rates to Keep the Momentum Going for the Housing Market - Anuj Puri, Chairman - ANAROCK Group

Payback period for investment in sustainable warehouses come down to three years in India: A JLL - IndoSpace report

CRISIL Ratings - Profit margins of cotton yarn spinners to plunge 250-350 bps to decadal lows of 7-8% this fiscal

Government, PSUs, and Defence sector experience 14% upsurge in hiring: foundit Insights Tracker

CRISIL Ratings: Spirits high for organised liquor makers, revenues seen up 13%

Corporate bond market to more than double by fiscal 2030 - CRISIL

Gas Utilities : Gas consumption at record highs, growth now to trickle - Kotak Institutional Equities

Emkay and Geojit increase target prices of LIC, expect over 20% upside

CRISIL Ratings: Mall area to rise by 35% over the medium term on retail surge

Crop & Chemical Dashboard: Bottom is near, recovery unclear - Kotak Institutional Equities

Loan sell-downs of personal loan pools may see a temporary pause following the RBI's decision to increase risk weights: ICRA

India Surges Ahead in 5G Deployment, Paving the Way for a High-Tech Future!

CRISIL Ratings: Construction equipment revenue to grow 14-15% this fiscal

India to contribute 22% to the Global ER&D sourcing market by FY30: BCG-nasscom Report

CRISIL Ratings: In a decadal first, revenue of agrochemicals makers to slip ~3% on tepid demand this fiscal

CRISIL Ratings: Flexible packaging industry stares at decadal low profitability as oversupply stings

CRISIL Ratings: Domestic demand, softer cotton prices to sustain RMG growth

CRISIL Ratings: Higher workplace occupancy to light up cigarette volume 7-9%

CRISIL Ratings: Apparel retailers to grow 7-8% this fiscal via expansion, festival spur

CRISIL Ratings: For tea companies, ~8% revenue degrowth brewing this fiscal

CRISIL Ratings: Revenue of paper makers to crumple 8-10% this fiscal

CRISIL MI&A: Red-hot domestic demand to stave off steel price melt this fiscal

CRISIL Ratings: Replacement demand to drive tyre volume up 6-8% this fiscal

CRISIL Ratings: Home textiles makers to weave revenue, profitability rebound this fiscal

Capital outlay on roads, renewables seen rising ~35% in this and next fiscals to Rs ~13 lakh cr, backed by strong execution pace


Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020