Serial interest rate hikes to fuel Q2 bank earnings
Banks are expected to post strong operational growth in the September quarter on the back of healthy margins and lower loan loss provisioning, analysts said. The sharp rise in policy rates, by 190 basis points, since May, and its transmission, will lead to an increase in net interest income and, consequently, a better net interest margin (NIM). Unlike the previous quarter, all banks are expected to see strong loan growth. It will be more diversified than the previous trend of favoring a few sectors such as retail. “Compared to the prior quarter, we should see NIMs starting to improve as MCLR/EBLR-linked loans have begun to reprice based on the new policy rates. Also, unlike the prior quarter, we are not concerned cash losses in this quarter as overall returns were slightly lower than in 1QFY23,” analysts at Kotak Institutional Equities said.