Banks share price target

On the whole, loan value, deposit value and CASA value were the highest for most listed banks in Q3FY23. HDFC Bank remains at the top in bank operations.

RBI proposes to adopt the ECL approach used in IFRS-9 for loss provisioning rather than the current approach of expected credit losses under US-GAAP. Public comments and feedback on the issues discussed in the paper may be submitted by 28th Feb’23. A period of at least 1 year from the date of final guidelines on the expected credit loss approach for loss provisioning would be ordinarily required by the banks to put in place the necessary systems and procedures, including the development and validation of expected credit loss models.

BFSI Q3FY23 - Earnings Preview

The total value of credit card transactions rose 28.7% YoY but fell 10.5% MoM. Private sector banks rose 32.5% YoY in terms of the value of transactions. The number of cards outstanding also increased by 19.4% YoY.

Q3FY23 earnings growth momentum on a sequential basis is likely to be better on the following grounds: i) continuing benefit of upward repricing in EBLR- and MCLR-linked loans is likely to outweigh pressures on funding cost, while NIM trajectory is expected to be positive for most banks under our coverage.

GNPA ratio of all SCBs may decline from 5.0% in Sep’22 to 4.9% by Sep’23 under the baseline scenario (compared to 5.3% earlier envisaged for Mar’23) and further to 7.8% for Sep’23 (8.3% earlier expected for Mar’23) under severe stress.

Banks’ sectoral credit deployment data for Nov’22 suggests modest 0.2% MoM growth non-food credit to Rs128.96trn, up 8.9% YTD / 16.4% YoY.

Consolidated balance sheet of scheduled commercial banks (SCBs) registered double-digit growth in FY22, after a gap of seven years.