Banks Q4 Preview- Continued Pressure On NII, PAT, But Deposits Growth To Outpace Loan Growth: ICICI Securities

ICICI Securities Report

We see continued pressure on net interest margin on the back of moderating loan growth (up 3.5% QoQ) and net interest margin (10-15 basis points QoQ dip), though benign credit costs (including part reversals of AIF provisions) should somewhat cushion profit after tax growth.

We see systemic deposits growth accelerating (~5.5% QoQ), though reckon some seasonal tailwinds alongside. Interestingly, provisional update from banks comprising ~50% of systemic credit/deposits indicates clear trend of improvement in the loan to deposits ratio QoQ, which holds true for even select PSU banks with low LDR.

Not with standing concerns on softening loan growth and NIM moderation (due to policy rates), the sustainability of healthy deposits growth and easing systemic liquidity could aid re-rating among private banks, as asset quality and headline return on assets remain strong.

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