Banks share price target

The RBI has raised policy repo rate six times totalling 250 bps in less than a year since May’22 before announcing a pause in the latest policy review. Although the withdrawal of accommodation stance and rate hike cycle in the last one year remains sharpest in the past decade and a half. Indian banks have witnessed and withstood enough hawkish rate scenarios and can therefore navigate the current situation well.

The RBI has raised policy repo rate six times totalling 250 bps in less than a year since May’22 before announcing a pause in the latest policy review. Although the withdrawal of accommodation stance and rate hike cycle in the last one year remains sharpest in the past decade and a half.

The total value of credit card transactions rose 45.5% YoY and 8.3% MoM to Rs 1,28,067.9 crore in January. The number of cards outstanding also increased by 17.4% YoY. Private sector banks grew 17.1% YoY in terms of value of transactions.

BFSI Q4FY23 - Earnings Preview

We visited Ahmedabad [approx. 36% of credit market in Gujarat with advances base of ~Rs2,935bn and deposit base of Rs2,934bn (~29% of total deposits in the state). We interacted with key market participants including housing financiers, gold financiers, SME lednders, MFIs, vehicle dealers, fintechs and intermediaries.

Monthly data on lending and deposit rates of scheduled commercial banks (SCBs) (excl. regional rural banks and small finance banks) for the month of Feb’23 point at the following trends: 1) SCBs’ weighted average lending rate (WALR) on fresh loans,n was up 142bps in the 12-month period defined at the top of this paragraph; 2) their TD rates were up 100bps in the same 12 months (75bps in the 6-month period).

Banks’ sector deployment data for Feb’23 suggests overall non-food credit now stands at Rs134.15trn, up 15.9% YoY / 0.9% MoM / 13.3% FY23-TD, with growth driven by NBFCs, trade, housing and other retail loans.