Banks share price target

Q1FY24 has been an interesting quarter with steady and strong balance sheet metrics, continued comfortable asset quality behaviour and strong growth in profitability metrics such as NII, PPOP and PAT on YoY basis. However, as re-pricing of deposits is now catching-up, there has been trend reversals on NIM front, which, along with rise in opex, resulted in sharp deceleration on NII / PPOP and PAT on QoQ basis.

Top Sector Ideas - Banking, Financial Services and Insurance (BFSI)

Most listed banks saw an increase in loan value, deposit value, and CASA value in Q1FY24, with HDFC Bank maintaining its leading position.

We present the earnings conference call compendium which has the detailed takeaways from Q1FY24. The underlying discussion revolved around NIMs trajectory, growth outlook, opex / attrition and sustainability of the current benign credit cost cycle.

We present the key takeaways from the RBI’s August monetary policy (on Aug 10, ’23). The policy rates have been kept unchanged unanimously. The monetary policy transmission is still underway. The real GDP growth estimate for FY24 is unchanged at 6.5%, while CPI inflation projection has been hiked to 5.4% vs 5.1% in the last policy (June ’23).

Banks’ sector deployment data for Jun’23 (as of 30 Jun’23) suggests overall non-food credit now stands at INR 143.6trn, up 16.3% YoY and 3.7% MoM. There is acceleration in credit growth YoY for all four sub-segments though the growth has been driven by services and retail while industry growth is still a laggard.

The total value of credit card transactions rose by 26.1% YoY to Rs 1,37,586.4 crore. The number of cards outstanding increased by 12.7% YoY. Private sector banks grew by 30.9% YoY in terms of value of transactions.

The monthly data on lending and deposit rates of scheduled commercial banks (SCBs) (excl. regional rural banks and small finance banks) for Jun’23 suggests: 1) SCBs’ WALR increased for the 14th consecutive month while WALR on fresh loans remains volatile, 2) O/s WADTDR continues its upward movement, 3) Fresh WADTDR also rises MoM after a drop in the past 2 consecutive months.

Expect steady system credit growth in Q1 and recovery in deposits due to rate realignment and discontinuation of 2,000-rupee notes

BFSI Q1FY24 - Earnings Preview