Unpaid credit facility is Rs 128.6t. Lending growth picked up in October and has seen strong one-way growth so far. In fiscal year 23YTD, total lending increased by 8.1%.
While any significant changes in the demand environment should be watched, given the challenging macro environment, we expect systemic credit to grow ~13%/14% YoY respectively in year FY23 / FY24.
Retail loan growth continued to be strong (up 19.5% YoY), led by ~27% / ~ 20% / ~ 16% YoY growth in Credit Card / Car Loan / Purchase home, respectively. Retail lending ratio increased to 31.6% of total outstanding loans from 29.8% in FY21.
On the other hand, credit growth of the whole industry is gradually recovering (+11.4 % YoY in August 2012 + 10.5% YoY in July 722). In the industry, credit to industries on average grew strongly by 35.6% YoY; while credit to micro and small industries increased ~28% YoY.
Credit to large industries grew by 6.4% over the same period last year and is showing good signs of recovery. Credit growth in the service sector stood at 17.2% YoY in August 22, led by good growth in NBFCs (+27.8% YoY).
Deposit growth remained modest at 9.6% YoY for two weeks (up 4.9% in FY23 so far). The outstanding deposit base is Rs 172.7t.
In the deposit sector, banks have noticed a mixed trend in attracting retail deposits, leading to an increase in the CASA ratio of small and medium-sized banks, while large banks have adjusted. details.
In the ongoing rate hike cycle, we expect deposits to gain momentum. The difference between credit growth and deposit growth at 8.3% is the highest in a decade (12-year high) except for the difference in deposit growth during the divestment period in October. 11/2016.
While the system can still finance growth using excess SLR, the focus on deposits will increase significantly in FY24, thus putting pressure on deposit rates.
We have seen banks raise deposit rates and as such, we remain cautious on margins in FY24, while we expect NIM improvement to continue in the second half of FY23.
The system’s credit-to-deposit (CD) ratio improved to 74.5% from a low of 69.6% in 1121. The two-week CD ratio rose to ~129% and it worked. better than 100% in the past year.
The banking system is seeing a healthy recovery in loan growth thanks to a resurgence in the corporate segment, while growth in the retail and SME segments remains strong. Deposit growth was modest. However, the same is expected to rise in the current rising interest rate regime.
Banks with higher CASA ratios and floating rate loans are likely to be better placed in a rising interest rate environment.
Axis Bank: Buy | Target Rs 975 | LTP Rs 909 | 7% increase
The retail business has strengthened, with retail lending’s share improving to ~58% of total loans, led by home loans. Asset quality continues to improve, supported by moderate slippage and a healthy recovery and upgrade.
Restructured books are further moderated while a higher supply buffer provides comfort. We expect NPAT to grow 63% / 16% for FY23E/24E and RoA/RoE of 1.8%/18.1% for FY24E.
Bank IndusInd: Buy | Target Rs 1,450 | LTP 1,146 Rs | 26% increase
Lending growth is seeing healthy traction across segments. Deposit traction continues to remain steady, with a focus on building a stable and detailed liability franchise. Rising interest rates are likely to boost yields, which along with loan growth should support margins.
The asset quality ratio improved thanks to slippage in business and consumer portfolios. Management is driving the momentum for continued loan growth and expects to end FY23 with 20% growth.
We estimate NPAT will report a CAGR of 40% over the 22-24 fiscal year period, resulting in an after tax margin of 16% in FY24E
(Author is Head of Retail Research, Limited)
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