iifl-logo

Invest wise with Expert advice

By continuing, I accept the T&C and agree to receive communication on Whatsapp

sidebar image

Banks: Loan growth strong; fresh spreads decline for private banks

1 Apr 2024 , 10:16 AM

System non-food loans have grown 1.6% since Dec-23 and 20.5% YoY (16.5% ex. HDFC merger). Growth was led by MSMEs, Agri and Retail, but the large Corporate segment remains sluggish. Following the increase in risk weights, loans to NBFCs declined 0.4%, but unsecured loan growth remains strong. With deposit growth of 13% YoY and all-time high LDR of 80%, analysts of IIFL Capital Services expect loan growth to moderate to 13-14% in FY25. Incremental spreads declined 11 bps for Private banks mainly, but improved by 18 bps for PSU banks since Dec. Fresh loan yield for Pvt banks have declined 12 bps vs. expectations of increase. Analysts of IIFL Capital Services residual repricing analysis shows divergent deposit and NIM outcomes in the near term. PSU banks are likely to deliver relatively better growth and NIMs in the near term.

MSMEs drive growth in Feb’24, high LDR to limit credit growth:

System non-food loans grew 1.6% in last two months and 20.5% YoY (16.5% YoY ex. HDFC merger) in Feb’24. Deposit growth improved, but continues to lag credit growth at 13% YoY. Sectoral deployment data shows growth, mainly led by MSMEs, which in turn was driven by micro enterprise loans. Unsecured loan growth remains strong at 27% YoY, while loans to NBFCs declined 0.4% since Dec-23 (+16% YoY). Analysts of IIFL Capital Services forecast system loan growth to decelerate to 13-14% in FY25, due to the funding constrain.

Incremental loan yields moderate for private banks:

WALR on fresh loans declined 12bps since Dec 2023 for private banks, while for PSU banks WALR improved by 15bps. On O/s basis the WALR remains flattish for both private and PSU banks. Analysts of IIFL Capital Services expect limited yield improvement hereon from the back book re-pricing.

Incremental spreads decline for private banks, but o/s spreads remain flattish:

Incremental spreads declined by 11bps for private banks mainly due to 12bps decline in fresh WALR, whereas for PSU banks spreads improved 18bps in last two months. Analysts of IIFL Capital Services residual cost of deposit re-pricing analysis shows 10-30 bps of further increase in cost of deposits, and divergent near-term NIM outcomes.

Related Tags

  • Banks
sidebar mobile

BLOGS AND PERSONAL FINANCE

Read More
Knowledge Center
Logo

Logo IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000

Logo IIFL Capital Services Support WhatsApp Number
+91 9892691696

Download The App Now

appapp
Loading...

Follow us on

facebooktwitterrssyoutubeinstagramlinkedintelegram

2025, IIFL Capital Services Ltd. All Rights Reserved

ATTENTION INVESTORS

RISK DISCLOSURE ON DERIVATIVES

Copyright © IIFL Capital Services Limited (Formerly known as IIFL Securities Ltd). All rights Reserved.

IIFL Capital Services Limited - Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248
ARN NO : 47791 (AMFI Registered Mutual Fund Distributor)

ISO certification icon
We are ISO 27001:2013 Certified.

This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.