Banks share price target

In Q4FY25, India’s banking sector has witnessed a decline in credit growth led by slowdown in economic activities across sectors, slower pickup in government spending and regulatory caution on retail funding risks.
As per the provisional reporting, Public sector banks (PSBs) drove credit expansion aggressively in Q4FY25, led by robust demand in retail, MSME, and a healthy corporate loan pipeline.

Positive Result Plays: Banks ICICI Bank, HDFC Bank, SBI, Kotak Mahindra Bank NBFCs Shriram Finance, Bajaj Finance, Cholamandalam Negative Result Plays: CreditAccess Grameen, Equitas SFB

We anticipate industry credit growth to moderate to ~11.0% by end of FY25E, marking a sharp decline from 20.2% in FY24. This slowdown is largely attributed to a deceleration in unsecured loan expansion and persistent stress in the Microfinance (MFI) segment, which has prompted a more cautious lending approach across the sector.

Top Conviction Ideas (BFSI) - ICICI Bank, HDFC Bank, State Bank of India, City Union Bank, Bajaj Finance, Cholamandalam Investment & Finance, Shriram Finance

Banking industry credit growth has slowed down from a peak of 14.0-16.0% YoY due to moderation in retail and unsecured loans.
As of December 13, 2024, credit offtake had reached INR 175.9 Tn, marking an 11.3% YoY growth. The moderation in growth is attributable to several factors, including regulatory measures by the Reserve Bank of India (RBI) such as increased risk weights and the proposed Liquidity Coverage Ratio (LCR) norms.

Q3FY25 Earnings Preview - Banks, Financial Services and Insurance (BFSI)

The Indian banking sector faced a softer quarter in Q2FY25, with moderated NIMs and increased provisioning expenses, particularly among private banks.
Unsecured loan growth, particularly in microfinance and credit cards, slowed due to increased delinquencies.

Major NBFCs have noted a decline in asset quality in Q2FY25, mainly driven by higher credit costs and pressure in the unsecured lending segment. This issue is especially evident in microfinance institutions (MFIs), which continue to encounter significant difficulties.

Top Conviction Ideas - ICICI Bank Ltd; HDFC Bank Ltd; State Bank of India; Federal Bank Ltd; Nippon Life India Asset Management Ltd; Bajaj Finance Ltd; Cholamandalam Investment & Finance Company Ltd.

In August 2024, the total value of credit card transactions continued the trend from July, and increased by 13.2% YoY, reaching Rs 1.7 lakh crore. Concurrently, the number of outstanding credit cards also grew, by 15.6% YoY. Private sector banks saw a 15.5% YoY rise in the value of transactions.

Loan growth in the banking system has slowed according to recent RBI data, while deposit growth remaining range bound.
As of September 20, 2024, systemic credit growth has been reported at 13.0% YoY (including private and public sector banks), reaching INR 171.3 Tn.