BFSI Q3 Results Preview - Improving Credit Growth, NIM Trajectory To Aid Profitability: ICICI Securities

ICICI Securities Report

Q3 FY23 earnings growth momentum on a sequential basis is likely to be better on the following grounds:

1. continuing benefit of upward repricing in external benchmark lending rate- and marginal cost of lending rate-linked loans is likely to outweigh pressures on funding cost, while net interest margin trajectory is expected to be positive for most banks under our coverage;

2. advances growth is gaining traction (up more than 4% QoQ) outweighing deposits growth and further expanding the credit/deposit ratio;

3. absence of treasury hit or possibility of some write-back as G-sec yields and corporate spreads have moderated QoQ.

Cost structure is expected to remain elevated though growth rates would be relatively lower. On asset quality front, we expect incremental non-annualised slippages run-rate to be contained in the range of 0.3-0.6% (non-annualised) and credit cost to normalise.

For Q3 FY23, we estimate more than 20% YoY growth in net interest income, more than 25% YoY growth in pre-provision operating profit, and ~40% YoY growth in profit after tax for the banks under our coverage.

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