In the fourth quarter of FY15, system loan growth had remained weak (9.8% in March) and problem asset generation remained elevated as the recovery remains sluggish and banks restructure loans ahead of the dispensation for restructuring expiring.
Barclays Research expects the PSU banks to deliver weak (-3% to +7%) preprovision operating profit (PPOP) growth and PAT to be flattish or down, other than SBI. Elevated problem asset generation and higher credit costs are the major reasons for PSU banks sluggish growth. PPOP growth is expected to lag loan growth as opex growth, despite cost control remaining above balance sheet and revenue growth with net slippages and credit costs to remain elevated at Q3 levels.
''Among the large private sector banks, Axis and HDFC and among the smaller private sector banks, Yes, IIB and Kotak are expected to deliver stronger (< 15%) PPOP and PAT growth. The major reason for their performance is faster loan growth than PSU's and stable NIM's supported by softening wholesale rates,'' Barclays added.
''Within the NBFC space, housing finance companies are expected to show sequentially higher margins and steady growth on the back of healthy demand in the individual segment and a softening of wholesale rates. The vehicle finance companies are expected to show a moderate pick-up with a weak PAT on account of elevated credit costs,'' it said.
