Top picks: Bajaj Finance, M&M Financial Services, Ujjivan Financial Services
|Bajaj Finance (Rs cr.)||Q3FY19E||yoy%||qoq%|
|Net interest income||2,924||23.4||7.1|
|Loan loss provision||347||40.4||10.1|
Bajaj Finance's AUM is expected to grow ~35% yoy, slowdown in consumer durable and wholesale lending should be expected. Margins would likely come under pressure in the quarter leading to a moderation in NII growth. Asset quality is expected to remain benign on the whole. GNPL ratio stood at 1.5% as of 2QFY19 with a 65% PCR. To watch for: 1) direction of cost-to-income ratio, 2) commentary on growth outlook
|Cholamandalam Investment & Finance (Rs cr.)||Q3FY19E||yoy%||qoq%|
|Net interest income||779||-1.7||6.8|
CIFC AUM is likely to grow ~27% yoy driven by sustained growth momentum in vehicle finance (HCV, LCV and used vehicles) (~74% of AUM) and a pick-up in the Home Equity (HE) segment. Margins are likely to compress qoq, due to an increase in cost of funds. Asset quality is likely to improve overall, GNPL ratio stood at 2.0% as of 2QFY19.
|HDFC (Rs cr.)||Q3FY19E||yoy%||qoq%|
Advances are expected to increase ~17% yoy, we do not expect a slowdown, given HDFC’s well maintained ALM and ability to raise funds at the least cost in the market. We expect NIMs to be flat-to-marginally-lower as a majority of the increase in cost of funds would be passed on to customers.
|LIC Housing Finance (Rs cr.)||Q3FY19E||yoy%||qoq%|
|Net interest income||962||7.2||-5.0|
LIC HF advances are expected to remain stable at ~15% yoy led by growth in LAP and developer loans. Margins are likely to come under pressure qoq due to increase in the cost of funds, while yield on loans could expand marginally. Retail GNPAs would continue to deteriorate yoy.
|Mahindra & Mahindra Financial (Rs cr.)||Q3FY19E||yoy%||qoq%|
|Net interest income||1,131||5.6||-3.0|
MMFS' AUM growth is likely to remain high at 18% yoy, driven by strong growth in SME and CV segments. Margins are expected to contract sequentially, due to increase in cost of funds. Asset quality should continue to show improvement on a yoy basis. GNPL ratio stood at 11.6% as of 3QFY18.
|PNB Housing Finance (Rs cr.)||Q3FY19E||yoy%||qoq%|
|Net interest income||384||-6.6||0.2|
We expect sharp slowdown in loan growth of PNB HF to 27% yoy in 3QFY19 (37% yoy in 2QFY19) due to high liquidity maintained in the quarter. Margins are likely to decline sequentially due to an increase in cost of funds and higher liquidity being maintained on the balance sheet. Overall asset quality is likely to remain stable qoq, GNPL ratio stood at 0.45% as of 2QFY19.
|Shriram City Union Finance (Rs cr.)||Q3FY19E||yoy%||qoq%|
|Net interest income||998||9.0||-2.1|
SCUF AUM growth is likely to come-off slightly at ~16% yoy. Growth would be driven by business loans (SME) and personal loans. Margins are likely to come off sequentially due to an increase in cost of funds, coupled with a decline in yields.
|Shriram Transport (Rs cr.)||Q3FY19E||yoy%||qoq%|
|Net interest income||1,999||17.0||-3.0|
SHTF AUM growth is likely to moderate from 2QFY19 levels at 18%. Margins are likely to compress qoq, given an increase in cost of funds and decline in yields. Asset quality is likely to improve qoq from the 2QFY19 level of 8.8% (on 90-dpd basis).
|Ujjivan Financial Services (Rs cr.)||Q3FY19E||yoy%||qoq%|
|Net interest income||290||31.8||11.5|
Ujjivan’s advances growth is estimated at 28% yoy, led by MSME and home loans and some pick-up in MFI. Cost/income ratio would be flat, as it will convert a large part of the remaining 95 branches into bank branches. Asset quality is likely to remain stable. GNPL ratio stood at 1.9% as of 2QFY19, with ~84% PCR. To watch for: 1) announcement of the CEO’s successor, 2) growth outlook.