After IT companies, financial institutions will be next in line to announce their September quarter results.
Starting with HDFC Bank on October 15, Axis, ICICI and IndusInd Bank will report their results next week.
SBI and other public sector banks will follow suit.
Going by analysts’ estimates, banking and financial services sector could be the best performing sector for a second straight quarter, as credit growth remains robust and bond yields cooled off.
Pankaj Agarwal, Analyst (Banking & Financial Services), Ambit Institutional Equities says loan growth was 16% YoY at the end of Q2. Margins expansion likely due to rate differential between lending and borrowing rates. Bond yields flat YoY; better treasury income seen. Lower provisions likely on benign asset quality.
Independent market analyst Ambareesh Baliga believes aggregate net profit for the sector may surge around 40% over previous year.
Baliga says credit growth, margin expansion to drive numbers. Expect overall Operating Profit growth of 21% YoY; PAT 40%; NII 17%. Large private banks to perform better.
Meanwhile, Bloomberg’s consensus estimate pegs net profit growth of the 16 listed banks at 23.4% YoY and 20% sequentially.
Net interest income, meanwhile, is expected to have risen 10% YoY and roughly 10.8% sequentially.
That said, the pressure to mobilise deposits amid shrinking liquidity could put pressure on profitability and margins going ahead.
Pankaj Agarwal, Analyst (Banking & Financial Services), Ambit Institutional Equities says banks’ strategy around deposit growth to be watched. Deposit growth is 9% vs loan growth of 16%. The gap was bridged using excess liquidity during the pandemic period. Margin compression, slow loan growth ahead likely.
As regards today, Q2 results of HCL Technologies and Wipro will be on investors’ radar. Retail inflation data for September, Tracxn Technologies’ IPO, oil prices and other global cues will sway the markets.