S&P – The New Indian Express

By IANS

CHENNAI: Rising interest rates will allow Indian banks to continue posting good profits for the remainder of FY23, according to S&P Global Market Intelligence.

In a report on India’s banking sector, S&P Global Market Intelligence said five of the six largest banks by assets in India reported increased net profit for the fiscal second quarter that ended September 30, 2022.

“Banks have taken advantage of the higher interest rate environment to strengthen their net interest margins, while earlier efforts to reduce their non-performing assets have resulted in lower provisions for loan losses, such as the showed their newly released results reports,” the report noted.

Second-quarter fiscal results from the private sector, as well as public sector banks, were “perfect,” said Tusharika Aggarwal, research analyst, Asia-Pacific dividend forecasting at S&P Global Market Intelligence.

“I remain quite confident in the bank’s earnings for the rest of the year. Interest rate hikes, although the quantum will decrease, will still benefit Indian banks. And because credit growth is increasing, so despite high interest rates, net interest income will grow,” Aggarwal added.

While lending rates have risen overall with growing demand, interest rates offered to depositors have risen more slowly. Additionally, the gap, along with lower provisions for credit losses, resulted in better return on assets for banks, Aggarwal said.

Citing data from the Reserve Bank of India (RBI), the S&P Global Market Intelligence report indicates that bank credit growth accelerated for public and private sector banks in the first half of the 2022-2023 financial year. .

Private sector bank credit growth for the fiscal first half was 20.4%, compared to 13.9% for public sector banks.

The central bank expects gross domestic product growth of 7% in the current fiscal year ending March 31, 2023 and 6.5% in the next fiscal year, dampened by further monetary tightening in the central bank’s struggle to control inflation.

According to the report, although the RBI has raised its key rate by 190 basis points to 5.90% since May, another hike in the interest rate may not be abrupt as inflation may have peaked.

READ ALSO | Nine Russian banks open special vostro accounts for rupee trading

The main surprise in banks’ second-quarter financial results was a 25 basis point quarter-over-quarter increase in net interest margin (NIM), S&P Global Market Intelligence said, citing a report from Jefferies.

Most banks reported faster credit growth due to higher loan demand.

With deposit growth lagging behind credit growth, interest rates on term deposits will rise, which could lead to a movement of funds from savings accounts to term deposits, according to the report.

Some bank chiefs have said they will try to keep NIMs intact by opening more savings accounts where interest costs are low.

S&P Market Intelligence said the State Bank of India (SBI) reported an increase in fiscal second quarter net profit to 147.52 billion rupees from 88.89 billion rupees, while the net profit of the Bank of Baroda for the period rose 56.8% year-on-year to Rs 34. billion of Rs 21.68 billion.

READ ALSO | RBI Governor to Meet Bank CEOs on Wednesday; discuss the slow growth of deposits

The National Bank of Punjab, however, reported that its net profit for the quarter fell 55.3% to 4.94 billion rupees as the state lender increased provisions for non-performing assets by 30.9% by year-on-year to 35.33 billion rupees.

Private sector banks also recorded higher revenues, with HDFC Bank Ltd posting a 22.3% year-on-year increase in consolidated net profit for the September quarter to Rs 111.25 billion, while ICICI Bank Ltd recorded a 31.4% increase in net profit. at Rs 80.07 billion. Axis Bank Ltd’s profit rose 65.7% to 56.12 billion rupees, S&P Market Intelligence said.

CHENNAI: Rising interest rates will allow Indian banks to continue posting good profits for the remainder of FY23, according to S&P Global Market Intelligence. In a report on India’s banking sector, S&P Global Market Intelligence said five of the six largest banks by assets in India reported increased net profit for the fiscal second quarter that ended September 30, 2022.” Banks took advantage of the higher interest rate environment to strengthen their net interest margins, while earlier efforts to reduce their non-performing assets led to lower provisions for loan losses, as showed their recently released earnings reports,” the report noted.Fiscal second-quarter earnings for the private sector, as well as public sector banks, were “perfect,” said Tusharika Aggarwal, research analyst, dividend forecast in Asia Pacific at S&P Global Market Intelligence “I remain quite confident in the bank’s earnings for the rest of the year. Interest rate hikes, although the quantum will decrease, will still benefit Indian banks. And because credit growth is increasing, so despite high interest rates, net interest income will grow,” Aggarwal added. While lending rates have risen overall with growing demand, interest rates offered to depositors have risen more slowly. Additionally, the gap, along with lower provisions for credit losses, resulted in better return on assets for banks, Aggarwal said. Citing data from the Reserve Bank of India (RBI), the S&P Global Market Intelligence report indicates that bank credit growth accelerated for public and private sector banks in the first half of the 2022-2023 financial year. . Private sector bank credit growth for the fiscal first half was 20.4%, compared to 13.9% for public sector banks. The central bank expects gross domestic product growth of 7% in the current fiscal year ending March 31, 2023 and 6.5% in the next fiscal year, dampened by further monetary tightening in the central bank’s struggle to control inflation. According to the report, although the RBI has raised its key rate by 190 basis points to 5.90% since May, another hike in the interest rate may not be abrupt as inflation may have peaked. READ ALSO | Nine Russian banks open special vostro accounts for rupee trading through Jefferies. Most banks reported faster credit growth due to higher loan demand. With deposit growth lagging behind credit growth, interest rates on term deposits will rise, which could lead to a movement of funds from savings accounts to term deposits, according to the report. Some bank chiefs have said they will try to keep NIMs intact by opening more savings accounts where interest costs are low. S&P Market Intelligence said the State Bank of India (SBI) reported an increase in fiscal second quarter net profit to 147.52 billion rupees from 88.89 billion rupees, while the net profit of the Bank of Baroda for the period rose 56.8% year-on-year to Rs 34. billion of Rs 21.68 billion. READ ALSO | RBI Governor to Meet Bank CEOs on Wednesday; to discuss the slow growth in deposits, however, the Punjab National Bank reported that its net profit for the quarter fell 55.3% to 4.94 billion rupees as the public lender increased provisions for non-current assets. performing 30.9% year-on-year to 35.33 rupees. billion. Private sector banks also recorded higher revenues, with HDFC Bank Ltd posting a 22.3% year-on-year increase in consolidated net profit for the September quarter to Rs 111.25 billion, while ICICI Bank Ltd recorded a 31.4% increase in net profit. at Rs 80.07 billion. Axis Bank Ltd’s profit rose 65.7% to 56.12 billion rupees, S&P Market Intelligence said.

Comments are closed.