The loan growth for banking sector was 11% yoy, which is almost the same as at the end of the previous quarter. "We have not seen the anticipated improvement in 3QFY15," said Kotak Institutional Research.
The slowdown is visible, mainly in the large corporate portfolio, where growth has slowed to less than10% while retail loan growth is still better at 15%. The slowdown impacts banks in different ways.
"With a sharp slowdown in fresh investments, loan disbursements to the corporate segment have fallen sharply. This is hurting public banks, given that their exposure in the corporate book is over 50% of loans. Also, many of the restructured loans are now completing their moratorium period, which implies that the pace of repayment of existing loans could have also accelerated. These factors have hurt corporate loan growth, which is now growing in single digits," it added.
"Despite a rise in disbursements in vehicle loans, led by a sharp rise in volume growth, we are not too sure that it would reflect in higher loan growth for retail banks like HDFC Bank and IndusInd Bank," the stock broker added.
"We think disbursements would not be sufficient to reach the overall industry average for the repayments that they are likely to see in their retail loan portfolio, considering that these banks have a higher share of low duration assets like vehicle loans or unsecured loans. However, other banks like ICICI Bank and Axis Bank are expected to report strong performances in the retail portfolio primarily because of their recent focus on retail and greater share of retail loans in long duration assets like housing.
Most regional banks have 15-20% of their overall loans in gold loans. While the recent regulatory clarification has enabled them to get back to this business with greater clarity the portfolio has been impacted by the pricing of gold and the focus to keep the overall LTV under check. We see these banks focusing on the SME business to build growth more than gold loans, in the short term.
"We expect growth in non-interest income to remain strong though most of the other line items like fee income, income from exchange and recovery will remain weak and at levels similar to the previous quarter," it said.
"With no such concern in the current quarter, we expect banks to report strong performance from treasury income. On the other hand, we expect banks to continue to report some MTM reversals. Provisions, if any, would be primarily for the restructured loan portfolio," Kotak added.
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