Serial interest rate increases to power bank earnings in Q2: Report

Analysts are expecting banks to report firm operating growth in the September quarter on the back of healthy margins and a drop in loan loss provisioning, as per a report in the Mint. The sharp hike in policy rates by 190 basis points since May and its transmission will result in a higher net interest income (NII), and hence, better net interest margin (NIM). As per the brokerage Prabhudas Lilladhar, private banks could report NII growth of 21 percent from the year earlier, as both NIM and credit growth could report an uptick quarter-on-quarter. Loan growth in line with the system can also be seen in public sector banks, while NII increase may stand higher at 15 percent. In the second quarter, HDFC Bank saw 24 percent year-on-year loan growth with retail growing 22 percent, commercial-rural 32 percent and wholesale 26 percent. According to the analysts at Kotak Institutional Equities, NIMs are likely to improve as the loans linked to MCLR/EBLR have begun to reprice reflecting the new policy rates. Also, there are no concerns about the treasury losses in this quarter unlike the previous one. All banks are likely to see strong loan growth unlike the previous quarter. The asset quality is also expected to improve further. While there won’t be any large recovery in corporate loans, analysts expect better trends of recovery in small ticket loans that defaulted post COVID. Treasury gains are expected to be muted after banks took a sharp hit because of market losses on investments in government securities in the June quarter. As of 9 September, system deposit growth was 9.5 percent from last year. Banks have hiked MCLR rates by 70-100 bps in the last 12 months. The lending rate on outstanding book for banks rose up by 40 bps till August. While margins have been likely expanded for the banking system, this margin expansion may get revised after the deposit book also gets repriced due to the higher rates. Read all the Latest News , Trending News ,  Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook , Twitter and Instagram .