Among domestic brokerages, Kotak Institutional Equities (KIE), which tracks a total of five PSBs including SBI, BoB, and Canara Bank, expects the aggregate PAT of banks under its coverage to rise by 142 per cent YoY. This would be driven by a 240 per cent yearly growth in BoB’s profit, over 100 per cent growth each in SBI
and Canara Bank, and Punjab National Bank’s profit in Q4FY21 as against a loss in Q4FY20.
Spoiling the party, analysts say, could be rise in bond yields that may lower the treasury gains. “The 10-year bond yield rose 30bps while the 5-year and 1-year yields climbed 92bps and 35bps, respectively, on a QoQ basis. We expect banks to book lower sequential gains though state banks have the leeway to book unrealized gains on held-to-maturity (HTM),” notes Elara Capital.
Analysts at KIE peg BoB’s treasury income at Rs 128 crore, down from Rs 925 crore in Q3FY21. For SBI, Canara Bank, and PNB, the same is pegged at Rs 636 crore, Rs 347 crore and Rs 649 crore, respectively, compared to Rs 959 crore, Rs 1,509 crore, and Rs 1,243 crore reported in the December quarter.
At the industry level, analysts at Emkay Global have estimated a credit growth of 7 per cent YoY and 4.6 per cent QoQ in Q4FY21 for banks under their coverage for the period under review. “Our channel checks and discussions with managements suggest continued healthy traction in mortgage, car, tractors and cards business, while commercial vehicle (CV) and personal loan (PL) remain sluggish,” the brokerage said.
Individually, Prabhudas Lilladher estimates 7 per cent YoY growth in SBI’s loan book at Rs 24.88 trillion, 42 per cent YoY growth in PNB at Rs 6.7 trillion, and 6 per cent YoY growth in BoB at Rs 7.31 trillion.
Factoring-in a 10-12 per cent yearly improvement in deposits, NII is likely to grow 33 per cent YoY on an aggregate basis for the above mentioned banks, the brokerage believes. Of these, PNB’s NII may rise over 80 per cent YoY while that of SBI
and BoB may advance up to 27 per cent on year.
“Net interest margin (NIM) will decline QoQ for all banks, but more for public banks, due to refund of interest on interest. In addition for state banks, NIM will also decline from reversal of interest on proforma NPLs,” Elara Capital pointed out.
Despite the final Supreme Court judgement in the loan moratorium case lifting the freeze on NPA classification, Nomura expects a positive picture on asset quality.
“While lenders are likely to paint a positive picture on asset quality, the mix of SMA 0-2 buckets will be critical. However, it’s fair to remind investors that year-ends typically suppress SMA-2 and increase SMA-0. The position on restructured loans and disbursement under ECLGS will also be important,” it added.
Those at Elara Capital further highlighted that restructuring in the quarter may be lower than the proposed restructuring that banks had disclosed in Q3 as a few corporate have opted out.
“We believe Shapoorji, Future Retail, SREI group, Vodafone Idea are the only four large corporate accounts under stress of which Shapoorji has been restructured while the deadline for Future Retail ends in April. Recovery of Bhushan Power and a few other smaller NPLs will aid earnings of state banks,” the brokerage added.
HSBC would track growth outlook and asset quality performance going-forward, as a fresh surge in Covid-19 infection rates and large states imposing activity restrictions may hamper economic recovery.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.