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RETAIL BANKING | Staff Reporter, India
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Clear skies ahead for Indian banks in Q3

Q3 FY2021 earnings are set to jump 6.5%.

A light at the end of the tunnel is possible for Indian banks come Q3 FY2021 as the economy rebounds and demand for auto and home loans increase, according to a Maybank Kim Eng report.

Q3 FY2021 earnings are set to go up 6.5% QoQ for its coverage universe, driven by a 13% YoY jump in net interest income and 15.6% hike in operating profit, analyst Kshitiz Prasad said. Loans are expected to inch up 7%.

Slippages are also likely to go up given the withdrawal of the loan moratorium. Gross non-performing loans for banks under coverage may grow by an average of 45 basis points, but lower provision may manifest as there has been high collection efficiency, as well as cautious loan growth focused on retail and the creation of provision buffers over the past three quarters.

Average deposits will increase 15% YoY for banks under coverage, driven by the objective of maintaining strong liability franchise, whilst the CASA ratio for the banks under coverage to be in excess of 40%.

The banks remain well capitalised which puts them in a strong position and bolsters their balance sheet to withstand pandemic-related shocks, the report concluded.

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