Riding on strong credit demand, banks are expected to post healthy growth in net profit for the fourth quarter ended March 11.
Most banks are likely to see a 20-50% growth in profits and a 20-30% rise in net incomes, according to estimates of various broking houses. Net interest income is the difference between interest earned and interest paid.
“We expect public sector banks to report 32.6% year-on-year (YoY) and private banks to report 20% YoY growth in net interest income (NII) led by strong growth in advance,” said Ajay Parmar, research head, institutional equities, Emkay Global Financial Services.
Credit growth had remained strong during the quarter at about 23% YoY till mid-March. On an incremental basis, credit expanded by R93,000 crore during the January-March period, driven by demand from retail and corporate segments.
Banking major such as SBI, ICICI Bank, HDFC Bank, Bank of Baroda are expected to post a 30-50% growth in net profit. One of the reasons being the lower base of the previous year.
“We expect 22.3% YoY operating profit growth and 41% YoY net profit growth for our universe (stocks under its coverage),” said Abhishek Murarka, banking analyst, ICICI Securities.
However banks may also see some contraction in profit margins (around 10-20 percentage points), due to increased cost of funds in the last three months. In the last two quarters, term deposit rates have increased by 150-250 percentage points due to tight liquidity conditions.